Polyethylene: Down 1000/Tonne Week On Week! Could It Get Any Worse?

The reason for the wide range of polyethylene prices higher, when attributed to the international crude oil surge, a stone provoked a thousand waves, then, monomer, foreign, futures, petrochemicals followed one after another, the market atmosphere to the climax.

Spring sleep in the middle of the month is not aware of the dawn, everywhere hear the howl of woe. With the rapid fall in crude oil prices, polyethylene market without struggle downward trapped, China Plastics City field panic.

As of the 16th, Shanghai Petrochemical Q281 price fell 700 CNY/tonne from its high, Daqing Petrochemical 7042 price fell 800 CNY/tonne from its high and Lanzhou Petrochemical 5000S price fell 1000 CNY/tonne from its high. However, excessive concern does not change the status quo, up and down have a cause and effect. Let's start from the upstream, one by one analysis.

Upstream: If not for the upstream raw materials from which the rhythm of the polyethylene price decline is not so rapid. Overseas inflationary situation combined with Russia-Ukraine war intensified, intensifying energy market supply shortages, international oil prices set new record highs since 2008, March 7, WTI crude oil once stood at a high of $133.46/barrel; Brent crude oil May futures hit a high of $139/barrel.

With signs of de-escalation in Russia and Ukraine, positive progress in the Iranian nuclear negotiations, the UAE's production increase statement, the Federal Reserve interest rate hike or the imminent arrival of many factors together, international oil prices fell sharply from the high level, March 15 WTI settlement price of $96.44 per barrel; Brent settlement price of $99.91 per barrel, cost support weakened. The polyethylene spot market quickly reacted with a wide range of declines.

Futures: the recent plunge in crude oil, market bearish sentiment occupies, linear futures main contract 9 settlement price 9673 yuan, 16 settlement price has been to 8823 yuan, taking into account the current volatility of crude oil, market risk still exists, short-term continue to follow the cost fluctuations.

Supply: recent domestic supply pressure is mixed, first, inventory, high inventory is tied to the petrochemical companies on the time bomb, as of March 16, the two oil reservoirs exist 1.03 million tons, up 13.8% over the same period last year. Second, maintenance, part of the petrochemical plant to reduce the negative or parking.

This week's parking device added Fushun Petrochemical, Yantai Wanhua, Yangzi Petrochemical, Lanzhou Petrochemical, Dushanzi Petrochemical, Shanghai Petrochemical, Tianjin United device, etc., the week PE device overhaul involving capacity in 3.36 million tons / year, the amount of overhaul losses of about 50,000 tons.

Third, the new production, Zhejiang Petrochemical Co., Ltd. second phase of 400,000 tons / year high pressure device is scheduled to start on March 18. Overall, the supply side, despite the increase in overhaul, but the impact of the epidemic combined with weak domestic demand or harder to form a trend to depot, inventory accumulation and new expansion of production, the market supply is still relatively adequate.

Demand: Despite the release of February economic data overall better than market expectations, but the reality of the end of the demand support is weak, the overall order is less than in previous years, and public health events in various regions are frequent, in addition to the impact of logistics, some areas of the start of work is also briefly affected. Last week, the PE downstream industries started at 48.4%, with limited demand support.

Summary: crude oil fell sharply, plastic futures opened low, high social inventory, petrochemical companies cut prices deeply affect the field mood, in addition to the outbreak of the epidemic around the panic mentality, part of the profit-taking disc negotiation for delivery, the short-term polyethylene fears are difficult to get rid of the weak pattern.

And in the medium and long term, crude oil prices have fallen, but still at a high level, and with prices down to a certain low area of downstream demand toughness is still in, the industry does not have to be overly pessimistic, to believe that "the mountains and waters are doubtful, the darkness of the flowers and a village".