Competition in polyethylene industry willintensify with 2.2 million tons/year capacity coming on stream

As China's polyethylene enters the era oflarge refining and expansion, the capacity grows significantly. At the sametime, the new resources are mostly low-priced products. 2021 will be a year ofconcentrated expansion of polyethylene, with new capacity of 4.4 milliontons/year and a capacity growth rate of 20%. According to the plan, the newcapacity of polyethylene is 3.95 million tons/year this year, and as of the endof October, 1.75 million tons/year of capacity has been put into operation, and2.2 million tons/year of capacity will be put into operation during the year.In addition, from 2023 to 2024, there are still 4.95 million tons/year ofdomestic installations planned to be put into operation, including a total of 3sets of installations planned to be put into operation in 2023, involving acapacity of 1.8 million tons/year. If the above-mentioned capacity is put intoproduction as scheduled, the polyethylene market becomes more and moreinvolute.

The concentrated release of productioncapacity will increase the operating pressure of polyethylene producers. Themarket of polyethylene in the first ten months of this year can be said to bethe most depressed overall performance after 2008. In the first half of theyear, the average price of polyethylene market was higher than that of the sameperiod in 2021 due to the sustained high international crude oil prices andstrong cost side support. However, after the second half of the year, thepolyethylene market did not perform as well as expected, and even prices hit anew low in August for the past two years, and the "golden nine and silverten" season was not prosperous. In particular, the oil-based polyethylenecontinues to be in a state of cost inversion due to high costs, and thesituation has not improved much even in the peak selling season, with a loss ofabout 1,000 yuan per ton of product. In addition, the repeated impact of theepidemic, the pressure on the inventory of producers, or will trigger a pricewar.

At the same time, the internationaleconomic situation is severe due to the combined effects of tightening monetarypolicies in Europe and the United States, geopolitical conflicts and theepidemic emanating from many places. As a result, the overall downstream ordersof polyethylene shrink, the terminal factory replenishment kinetic energy fellsharply, most of the time to maintain low inventory operation mode, which inturn suppressed polyethylene demand. In addition, with the implementation ofthe ban, plastic restrictions continue to strengthen, biodegradable plasticwill also replace part of the polyethylene packaging field demand.

Comprehensive view, downstream demand isdifficult to boost, while with the release of new polyethylene productioncapacity one after another, the domestic polyethylene market in the volumeatmosphere, before the establishment of a new supply and demand balance or willbe smoke.