China PE Market Weakens (December 22)

Domestic Petrochemical Inventory: Sinopec and PetroChina's polyolefin inventory totaled 720,000 tons, an increase of 60,000 tons from last week.

PE Spot Market Analysis: Today, the domestic PE market showed an overall weak trend. In North China, prices for linear, high-density, low-density film, and low-density fiber grades all declined, with price reductions ranging from 30-150 yuan/ton. In East China, prices for linear, high-density, low-density film, and low-density fiber grades also declined, fluctuating between 20-100 yuan/ton.

In South China, only the price of low-density fiber grade remained unchanged from last Friday, while prices for linear, high-density, and low-density film grades fell to varying degrees, with price adjustments ranging from 50-150 yuan/ton. The weak undertones of the domestic PE market are becoming increasingly clear. While maintaining overall stable ex-factory prices, producers have lowered prices for some products by 50-400 yuan/ton.

This, coupled with the weak sentiment from the futures market, has directly pushed the market price center of gravity downward. On the supply side, spot resources are ample, and increased production capacity is putting some pressure on supply.

On the demand side, however, demand is weak, with downstream enterprises insufficiently replenishing their inventories and generally adopting a wait-and-see attitude, reducing purchases and resulting in low market activity. Against this backdrop, traders are adopting a strategy of offering discounts to accelerate inventory turnover and alleviate financial pressure, further exacerbating the weak market situation.

PE Spot Price Forecast: In the futures market, the L2605 contract price fluctuated narrowly overnight, with the price center shifting downwards in the morning session and then fluctuating weakly at low levels in the afternoon. The current imbalance between supply and demand in the polyethylene market is intensifying, with the core logic being the strong offset between rigid growth on the supply side and persistently weak demand. On the supply side, several new domestic plants have entered a stable production phase, maintaining high capacity utilization rates.

Coupled with increased imports, market supply remains ample, hindering enterprise inventory reduction and leading to an accumulation of total social inventory. Supply pressure from the upstream of the industrial chain is gradually being transmitted downstream. On the demand side, the situation is even more sluggish. Operating rates in core downstream sectors such as agricultural film and packaging film have declined for several consecutive weeks.

Orders for agricultural film are slow to pick up after the peak season ended, and downstream procurement of packaging film is cautious, with weak new orders and overall procurement volumes remaining low. Meanwhile, the pace of macroeconomic recovery is slow, consumer confidence is low, and downstream product manufacturers are pessimistic about the future market, generally adopting a conservative strategy of "purchasing as needed and strictly controlling inventory," further suppressing the potential for market demand.

In summary, the core contradiction in the current market is not short-term supply and demand fluctuations, but rather a structural imbalance between long-term capacity expansion and weak end-user demand growth. Furthermore, intensified price wars within the industry are compressing profit margins and dampening companies' production enthusiasm. It is predicted that in the short term, the weak trend in the polyethylene market will be difficult to change, with increased supply on the supply side and a lack of upward momentum on the demand side, likely continuing its downward trend.

Mainstream PE Market Prices:

PE Futures Analysis: On December 22nd, L2605 opened at 6327, reached a high of 6350, a low of 6234, held 606,042 contracts, settled at 6292, compared to the previous settlement of 6392 (down 100), with a daily trading volume of 668,895 lots, outstanding funds of 2.647 billion, and capital inflow of 690,000.

Domestic PE Indices: According to data from TuDuoDuo, on December 22nd, the domestic HDPE spot index was 7011, down 78; the LDPE film spot index was 7981, down 78; and the LLDPE spot index was 6353, down 99.

Shenhua Auction Statistics: Linear PE auctioned 700 tons today, with 0 tons traded. High-density polyethylene auctioned 0 tons today, with 0 tons traded. Low-density polyethylene auctioned 0 tons today, with 0 tons traded.

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