Where is the polyolefin market heading?

The epidemic is still the biggest uncertainty in global economic development. China's economy continues to improve step by step. The internal economic cycle will pay more attention to domestic consumer demand, and the policy will accelerate domestic demand for plastic products. From January to July 2020, the cumulative import of plastic raw materials for primary shapes increased by 9% year-on-year, and the export of plastic products was 11.5%. The growth rate of plastic product exports was higher than that of plastic raw materials imports, showing the greater recovery of China's economy after the epidemic, and the recovery of exports good.


Imports of primary plastic raw materials increase in volume and prices

In July 2020, the import of primary form plastics was 3.84 million tons, a year-on-year increase of 22%, which was a decrease of 27 percentage points from the previous month; the import value for the month increased by 2.3% year-on-year, which was 15 percentage points less than the previous month.

From January to July 2020, the import of primary shape plastics was 22.719 million tons, a year-on-year increase of 9% and an increase of 2.3 percentage points from the previous month. In terms of import volume, it has entered a positive growth trend. The value of imports decreased by 5.4% year-on-year and increased by 1.4 percentage points from the previous month, mainly due to the impact of lower product prices this year.

In terms of monthly import prices, the average import price in July began to increase, and the import average in June was the lowest. The continuous rebound in the price of primary plastic raw materials in China, including polyolefins, has driven the price of imported plastics to rise.


Imports of polyolefins have increased dramatically, and linear imports have decreased year-on-year

In recent years, polyolefin imports have differentiated. In the last three years, PE imports have increased by double digits, while PP imports have maintained single-digit growth. Domestic PP diversified production processes have been put into production one after another, and import dependence has continued to decrease. Last year, PE imported 11.43 million tons, linear accounting for less than half, 5.24 million tons, and PP imported 3.49 million tons.

Looking at the import situation in the first half of 2020, the cumulative import was 8.7 million tons, an increase of 56% year-on-year, a huge increase. Linear imports were 2.508 million tons, a year-on-year decrease of 2%. The huge impact of the new crown epidemic has led to a sharp decline in foreign demand. The main export destinations of Europe and the United States are aimed at the Chinese market. China is the first to get out of the epidemic, and prices are starting to rise. The spread of inner and outer coats has greatly increased imports.

In terms of PP imports in the first half of 2020, the cumulative import was 3.023 million tons, a year-on-year increase of 90%, which is also a huge increase.


Plastic products exports maintain growth

In July, the export value of plastic products was 58.62 billion yuan, a significant year-on-year increase; the cumulative export value from January to July was 298.9 billion yuan, an increase of 11.5% year-on-year, a positive year-on-year growth for three consecutive months. In terms of the export volume of plastic products in the past three years, 2017-2018 maintained an increase of about 12% for two consecutive years, and in 2019, it was reduced to 8.5% due to the Sino-US trade war. Looking at the same amount of exports, the month-on-month increase in 2019 was 11.2% compared to 2018. From January to July this year, exports were basically the same as last year.


From the perspective of raw material imports and product exports, polyolefins are inseparable from the global market

China has a huge market. On the one hand, the import volume of polyolefin raw materials is relatively large. The main destination for European and American raw materials is China, while Chinese plastic products are mainly exported to Europe and the United States. In the global market, you are in me and you are in me. After all, polyolefins have a certain degree of import dependence. Without the source of imports, domestic polyolefins will have a price increase, but at the same time, plastic products have no external export channels, which will suppress the price of raw materials. The two-phase game can only find a new balance in the dynamic graph.

The main force of polyolefin futures will change months in the middle of the month. As overhauls have been completed and the operating rate has increased, the supply will increase, while downstream demand is still flat for the time being, international crude oil is still facing numerous resistances, and polyolefins are weak for some time.