Polyethylene still has supply pressure in the second quarter, and demand weakens

Although the domestic maintenance period is at the peak in the second quarter, there is a high probability that import volume will appear from May to June, and the PE import dependency will be 48%.

Supply is still under pressure

In terms of domestic supply, the impact of the new coronary pneumonia epidemic on the polyethylene industry chain is mainly reflected in the demand side. In addition, the new PE equipment of Zhejiang Petrochemical and Hengli was successfully put into production at the beginning of the year. Therefore, the domestic supply of PE in the first quarter remained at a high level and the average operating rate was 93 %about. Specifically, the output from January to March was 1.66 million tons, 1.53 million tons and 1.75 million tons, with a year-on-year supply growth rate of 14%.

In the second quarter, from May to June is generally the period of overhaul of domestic upstream equipment, and this year is no exception. Several large-scale coal chemical plants, Shenhua Ningmei Coal, Pucheng Clean, China Coal Yulin, etc. will be under overhaul from May. Affected by the overhaul of equipment, it is expected that the domestic chain supply growth rate will slow in the second quarter, with the year-on-year supply growth rate estimated at around 9%.

In terms of imports, at the beginning of this year, foreign companies generally had little pressure on inventories, and there was no stock dumping phenomenon as in previous years. Therefore, the growth rate of import supply in the first quarter was low. From January to March, PE imports were 1.182 million tons, 1.182 million tons, and 1.49 million tons, respectively, with a year-on-year supply growth rate of -2%.

In the second quarter, on the one hand, due to the impact of the new coronary pneumonia epidemic, foreign demand shrank in April-June, while foreign supplier production continued as usual, and China ’s recovering demand is expected to become the destination of global supply.

On the other hand, since the end of March, the PE import window has been open, which provides a profit window for the influx of foreign goods. According to the leading import volume in the import window for 1-2 months, from the middle and late May, foreign sources are expected to impact the domestic market.

Demand or entering the off-season

PE's domestic demand has obvious seasonal characteristics of "gold, silver and silver", and domestic demand from May to June will gradually enter the off-season. Taking LLDPE's largest downstream agricultural film as an example, the agricultural film has fallen back to a high level since it reached a staged maximum operating rate of 51% at the end of March. The survey data shows that as of April 23, the agricultural film operating rate was 35%, and the May-June start has further lowered expectations.

In terms of external demand, affected by the spread of the New Coronary Pneumonia epidemic overseas, external demand has been declining severely since April. Domestic plastic products accounted for 18%, and a large part of the associated demand for PE packaging will also be affected. It was difficult to recover months ago.

On the whole, the weak external demand further dragged down the demand side, which was already in the off-season. Demand from May to June was worrying.