I. Overall Trend

In the first half of 2019, the trend of the three major PE varieties in the domestic market showed shock and decline. LLDPE and HDPE in eastern China weakened in the first half of the year, and the trend declined mainly. LDPE first stabilized and then declined in the first half of the year. According to the monitoring of business associations, as of June 30, the ex-factory price of LLDPE 7042 in East China had dropped to about 7900 yuan/ton; the ex-factory price of LDPE 2426H had dropped to about 8312.5 yuan/ton; the ex-factory price of HDPE 5000S had dropped to about 8900 yuan/ton; the decline ranged from 800 to 1400 yuan/ton. The price trend of PE in the first half of 2019 is lower than that in 2018, and the overall price difference is large, and the price peak in the first half is lower than that in 2018.

LLDPE market shocks and falls in the first half of the year. At the beginning of January, the average price of LLDPE market was 9250 yuan/ton, and at the end of June, it was 7900 yuan/ton. Within half a year, it fell by 14.59%, which was 14.69% lower than that of the same period last year.

LDPE market stabilized first and then fell in the first half of the year. The LDPE market average price was 9137.5 yuan/ton in early January and 8312.5 yuan/ton at the end of June. The price dropped by 9.03% in six months and 13.19% compared with the same period last year.

HDPE market shocks and falls in the first half of the year. At the beginning of January, the average price of HDPE market was 9883.33 yuan/ton. At the end of June, the average price was 8900 yuan/ton. Within six months, the price fell by 9.95%, 21.03% compared with the same period last year.

II. Market Analysis

Crude oil: In the first half of 2019, the crude oil market showed a trend of rising first and then falling. From January to mid-April, oil prices rose successively. In early January, they inherited the decline at the end of 2018 and reached a low point. But then, oil prices rebounded rapidly, rising all the way to a half-year high. Geopolitical relations have led to a decline in production in Iran and Libya. OPEC countries have stepped up their efforts to reduce production, with a clear position on reducing production, a significant reduction in production, and market mentality support. The first four months of the trend has been strong and upward under the favorable stimulation. However, due to the interweaving of geographic situation and macro-pressure, international tensions have also had a serious impact on oil prices. Crude oil prices have fallen, with 4% rise and fall in several days. Later, with the suspension of the situation in the Middle East, the market focuses on exhaustion of demand and oil prices have fallen sharply. Until June, the rebound was suspended. On Friday (June 28), WTI crude oil August futures settled at $58.47 a barrel, down $0.96 from the previous trading day, trading range $57.75-59.80; Brent crude oil August futures settled at $66.55 a barrel, unchanged from the previous trading day, trading range $66.08-66.84.

Ethylene: Recently, the polyolefin market began to decline, and the ethylene market was not active. Ethylene overall also showed a downward trend in June. Asian ethylene market prices fell in June, with CFR closing at $777-785 per ton in Northeast Asia and $698-704 per ton in Southeast Asia by the end of June. Ethylene prices in the United States rose first and then fell, with prices ranging from $281 to $293 per ton at the end of the month. Overall: The upstream crude oil suddenly rose, but the overall ethylene market demand is light and trading is normal. The styrene sector continued to fall, unable to sustain the ethylene. The atmosphere of market wait-and-see is strong. Businessmen pay more attention to the situation of supply and demand after the festival.

PE market in the first half of 2019 can be divided into three stages:

The first stage: January – March, the trend around the Spring Festival is weak, stable and downward. January is approaching the Spring Festival holidays, the lack of demand expectations leads to cautious mindset and mainly wait-and-see. With the coming of the Spring Festival holidays, downstream factories gradually enter the holidays, the demand expectations are insufficient, the enthusiasm of downstream market entry is weakened, the trading atmosphere of the market has weakened, and the atmosphere of the spot market is pessimistic. After the festival, downstream production resumed, the start-up rate increased, and some purchases were put on the market. However, Petrochemical stocks accumulated more, up to 1.1 million tons, Petrochemical stockpile reduction efforts increased, the terminal mentality was cautious, the enthusiasm for entering the market was significantly weakened, and the contradiction between supply and demand increased. However, supported by the easing of trade war between China and the United States, tension in the Middle East and OPEC production reduction, crude oil has stepped out of a rising trend, and WTI and Brent have continued to rise. Upward crude oil plays a supporting role in the polyethylene market. PE market steadily declined.

The second stage: PE market rebounded slightly from early April to mid-April. Affected by the peak demand season of downstream agricultural film film in the first quarter and the continuing upward increase of oil price at the beginning of the month, some manufacturers are in the state of maintenance, which is good for the surrounding market, and the favorable price mentality of petrochemical industry is obvious. Under the influence of tax reduction policy, the market is also good, the trading atmosphere is more positive, and prices rebound slightly.

The third stage: from mid-April to the end of June, PE prices continued to fall. After entering the second quarter, as the demand for agricultural film and plastic film gradually decreased, the support of PE downstream demand for prices began to weaken. Influenced by the Sino-US trade war and other factors, plastic futures began to dive, affecting the market mentality. In addition, the continuous supply of imports has led to continuous price reduction. The middlemen and downstream are affected by the poor economic environment and demand, mostly purchasing on demand and operating in low warehouses. As a result, PE’s social inventory declined slowly and remained at a historic high level. Some petrochemical companies cancelled the price increase sales and lowered the ex-factory prices one after another. Although crude oil and futures rose sharply at the end of the month and the merchants reported high tentative results, the terminal still maintained just in need of replenishment and the downstream demand was not good. With sufficient supply and high social inventory, suppliers can only gradually reduce their sales prices. It is difficult to close a high price deal. PE market continued to weaken.

In the downstream enterprises, PE downstream film materials began to operate at a low level in early January, and the start-up was maintained at 4-50%. Except for some large factories, most of the other factories were in a state of shutdown. Construction started gradually in the second half of February, with some factories operating at 5-60%. The demand for plastic film is slow, the order accumulation is not much, some large factories maintain production, and some factories are in a low starting state. During the peak season of plastic film demand in March, manufacturers accumulated more orders, and large factories started construction with high load, and the start-up rate was maintained at about 50%. In May, the start-up rate of PE downstream membrane materials gradually decreased, and the start-up rate was about 1-30%. The demand for plastic film has ended, and the start-up rate is about 3-40%. In the field of plastic film, the manufacturers’orders are insufficient to follow up. Most of them maintain a low level. Large factories maintain a high-load start-up, and the overall start-up rate is about 3-40%. Demand continued to be weak in June. A small number of agricultural film manufacturers maintained low startup. The demand for sunlight film increased compared with the earlier period. The startup of the manufacturer warmed up slightly, the demand for plastic film ended, and the manufacturer turned to shutdown.

Import and export: PE import volume in May 2019 is about 1.419 million tons. Among them, LLDPE imports 4343,000 tons; HDPE imports 675,100 tons; LDPE imports 3097,000 tons. In May 2019, PE exports totaled 25.3 million tons.

Output: According to network data, the total domestic PE output in January-May this year was 7.2434 million tons, up 1.474 million tons from the same period last year, an increase of 24.12%. From the above data, it can be seen that although the peak period of equipment maintenance began in May, the domestic PE output did not decrease, but increased slightly. Compared with the same period last year, the overall domestic PE supply still increased significantly. After entering June, production is expected to decline due to factors such as equipment maintenance and safety inspection.

Industry insiders said: in 2019, the capacity of new polyethylene plant at home and abroad will exceed 8 million tons per year. New capacity basically delayed commissioning. In the case of PE equipment maintenance, domestic maintenance equipment began to increase gradually in late July. Imports were hanging upside down, windows were closed, downstream demand had good expectations, restraining market downward space, but the impact of maintenance on production capacity was limited.

3. Future Market Forecast

Some insiders believe that: in the short term, domestic petrochemical new overhaul devices are on the low side, some overhaul devices will start one after another, downstream start-up rate is general, Petrochemical depot reduction rate slows down, especially the international oil price falls sharply, resulting in lower ex-factory prices, suppressing buyers’buying enthusiasm, negative factors are dominant, PE market is still expected to adjust. Risk.

Business society data analysts believe that the third quarter is the traditional peak season. At present, crude oil prices are expected to continue to rebound. In the later stage, the demand for downstream agricultural film started slowly, and some factories had the demand for spare goods. The downstream demand improved, which just needed to support the market. After July, PE production plants with maintenance plans continued to increase. Futures continue to rebound, short-term upward capacity is insufficient. The market is expected to rise in the short term. But we still keep a cautious attitude.