Polyolefins: How strong is the market rebound after continuous declines?

Polyolefins: How strong is the market rebound after continuous declines?

Since the first half of January, the polyolefin market has not ushered in a good start, and the two markets have continued to fall endlessly. Since last Thursday, as the macro sentiment has bottomed out, the spot market has gradually destocked, and the market has gradually shown signs of rebound. As of January 15, the domestic linear mainstream price was 8070-8400 yuan/ton, up 20-90 yuan/ton from last Thursday, and the domestic PP wire drawing mainstream price was 7270-7450 yuan/ton, up about 30 yuan/ton from last Thursday. After the market stops falling, how strong is the rebound, and how far is the road to the rebound?

Supply side: The two oil inventories moved downward, and the output increased in the second half of the month

Entering this month, the two oil inventories were slow to ship due to the accumulation of inventory during the New Year's Day holiday and the decline in the market, and the polyolefin inventory once rose to the level of 700,000 tons, which was at a high level in the past four years. Under the continuous decline of the market and the signs of rising, the market has driven some buying purchases, and since last week, the two oils have accelerated to destock. Last Friday, the two oil inventories have fallen to 620,000 tons. And about the inventory on this Monday morning, although there are storage, the overall inventory level has fallen to the median level of the year. And with the continuous improvement of on-site shipments, it is expected that the upstream inventory will accelerate downward.

产量来说，无论聚乙烯还是聚丙烯1 月份国内检修装置小修为主，且聚丙烯再度面临扩能带来的供应增量，1月后半月聚烯烃产量及开工仍有进一步增加预期。聚乙烯来看，下半月仅中化泉州低压停车，但前期检修的兰化全密、茂名及海南低压等装置逐步开车，场内货源供应量将明显增长。聚丙烯方面，茂名、中韩及浙石化有停车计划，但同时前期停车的荆门、茂名三线和巨正源均有开车计划。且新增扩能方面，广东（揭阳）石化二线20万吨/年顺利投产，安徽天大15万吨/年聚丙烯装置已试产，即将正常运行，在新产能投放之下，供应压力依旧不容小觑。

In terms of output, whether polyethylene or polypropylene, the domestic maintenance equipment in January was mainly repaired, and polypropylene once again faced the supply increase brought by capacity expansion, and the polyolefin output and start in the second half of January are still expected to further increase. From the perspective of polyethylene, in the second half of the month, only Sinochem Quanzhou low-voltage shutdown, but the pre-maintenance of Lanhua Quanden, Maoming and Hainan low-voltage devices gradually started, and the supply of goods in the field increased significantly. In terms of polypropylene, Maoming, China and South Korea and Zhejiang Petrochemical have maintenance plans, but at the same time, Jingmen, Maoming Third Line and Juzhengyuan, which were parked in the early stage, have operation plans. In terms of new capacity expansion, the second line of Guangdong (Jieyang) Petrochemical has been successfully put into operation with 200,000 tons/year, and the 150,000 tons/year polypropylene plant of Anhui Tianda has been put into trial production and will operate normally. Under the launch of new production capacity, the supply pressure should not be underestimated.

Demand side: short-term trading and investment has stabilized, and medium-term rigid demand has weakened

At present, with the improvement of the futures and spot markets, some of the early wait-and-see buying orders entered the market on dips, and the trading atmosphere in the market has stabilized. However, in the medium term, it has become an indisputable fact that the demand for polyolefins has weakened, and the downstream categories have maintained the year-end orders, and the new orders have continued to weaken, and the impact of the return of corporate funds at the end of the year restricts the circulation of raw materials.

Raw materials: pay attention to whether there is a risk of spillover from the armed conflict between the United States and the United Kingdom and the Houthis

Oil prices edged higher as U.S. and allies airstrikes against the Houthis could trigger a broader conflict and disrupt crude supplies to the Middle East. However, the prospect of increased supply and slower demand growth in non-OPEC countries continues to constrain the strength of the rebound. The crude oil market continues to pay attention to the geopolitical situation in the short term, and after the exchange of attacks between the United States and the United Kingdom and the Houthis, pay attention to whether there is a risk of spillover over from the scope of the conflict. Coal, most coal mines in the Ordos region of Inner Mongolia maintain normal production and sales, mainly to implement long-term shipments, superimposed port quotations continue to decline slightly, the terminal is still mainly improved by rigid needed, there is no large demand for replenishment, and it is expected that the coal price at the pit mouth will maintain a weak operation situation in the short term. On the whole, under the influence of the geopolitical situation has not continued to escalate, the upward drive of the raw material side to the polyolefin market is relatively limited.

Commodity sentiment: China is concerned about whether PPI can turn positive

In the first half of January, the overall domestic commodity sentiment was poor, on the one hand, due to the revision of US interest rate cut expectations, and on the other hand, it was a reflection of weaker domestic macro data. However, after the market fully trades the bearish, the short-term focus is on whether the domestic PPI can turn positive, and whether the Fed will continue to reduce the number of interest rate cuts in 24 years. In view of the domestic social finance and credit data, interest rate cuts have not been implemented, and the short-term commodity sentiment is still cautious about whether the commodity sentiment can continue to recover.

On the whole, the current polyolefin market has rebound repair demand after continuous decline, but the rebound is relatively limited in the medium line under fundamental constraints, and the market variables focus on changes in raw material and commodity sentiment.