The hottest PE rebound peaked and the market was w

PE: the rebound peaked and the aftermarket was weak

PE: the rebound peaked and the aftermarket was weak

December 26, 2018

entering December, the polyethylene (PE) market rebounded rapidly. Last week, the HDPE reference price was 10100 yuan (ton price, the same below), up 2.71% from the beginning of the month; The reference price of LDPE was 9237 yuan, up 3.21% from the beginning of the month; The reference price of LLDPE was 9350 yuan, up 2.56% from the beginning of the month

insiders generally expect that although the PE market has risen slightly at present, this rise will not be sustainable without obvious support from the cost side and the continuous loose relationship between supply and demand

insufficient cost support

recently, the international crude oil market can be described as a mixture of sadness and joy. On the one hand, OPEC and its allies reached an agreement to reduce production, which injected a strong impetus into the market; On the other hand, out of concern about the global economic situation and the implementation of the production reduction agreement, pessimism is widespread in the industry, and crude oil prices are still depressed

Li Lin, an analyst at jinlianchuang petroleum, believes that the current market pessimism is heavy, and it is difficult for oil prices to rise substantially for the time being until there is a substantial decline in crude oil supply

OPEC reached an agreement to reduce production by 1.2 million barrels per day in 2019. However, the industry generally believes that the degree of production reduction is not enough. According to Goldman Sachs analysts, OPEC needs to reduce production by at least 1.3 million barrels per day to reverse the current oversupply of crude oil; JPMorgan Chase analysts believe that 1.5 million barrels per day should be reduced. Moreover, with the current increase in U.S. crude oil production and inventories, the OPEC production reduction agreement is probably just a drop in the bucket

economic recession is the biggest risk facing oil prices. Suixiaoying, an analyst at founder medium term futures, believes that the U.S. economic growth rate will probably decline in 2019. At the same time, GDP in some parts of Europe began to shrink, emerging market currency crisis and global financial turmoil appeared, these signals of global economic recession will drag down the crude oil market

at present, the industry holds a wait-and-see attitude towards the trend of international oil prices, so PE cost support is limited

supply pressure is large

in the fourth quarter, PE inventory has always been at a high level. Previously, due to the loss of some production capacity due to the maintenance of the device, the common testing equipment of external wall insulation materials include: electronic universal testing machine for insulation materials, cutting device for insulation materials, on-site pull-out tester for external wall insulation materials, and other inventory has slightly decreased, but with the resumption of production of maintenance devices in December, the inventory has further accumulated, forming a supply pressure

according to Lang Yi, the operation director of a petrochemical enterprise, the number of PE devices with an accuracy of 0.1mm increased in November, and the output lost in that month was 207000 tons. Affected by this, the inventory of petrochemical enterprises decreased by 4.37% month on month compared with the same period in October. At present, the maintenance of Shanghai Secco, Pucheng and Fujian combined units has come to an end, and there are few new maintenance units in the later stage. Therefore, the recent new supply pressure in the domestic PE market is large

in addition, the source of imported goods also puts pressure on the domestic market. According to Lang Yi's prediction, the import volume of PE in December was about 1.25 million tons, which remained at a high level, and the price was also at a low level, which brought pressure to the domestic PE market from the two aspects of supply and price

under the circumstances of high overall inventory in the market and pressure from import sources, PE supply will be loose in the future

weak demand

"on the one hand, the market supply is expected to be loose, and on the other hand, significant social benefits will be achieved. On the other hand, the downstream demand continues to be weak, making life difficult for PE enterprises." Lang Yi said that the operating rate of PE downstream film materials, pipes and other industries continued to decline in December, and the operating situation of other industries was not optimistic due to the expected decline in export orders

in December, farmers in some northern areas basically completed the agricultural film coverage in winter. The agricultural film orders in these regions have basically ended, and the weakening demand has dragged down the startup rate of agricultural film production enterprises, which is currently about 50%, down about 5 percentage points from last week. The demand in southern China is mainly for films for fruits, flowers and tobacco, and the peak demand season is also approaching the end. The enthusiasm of downstream raw material procurement is significantly reduced, and the overall support to the PE market is weakened

at the same time, the demand for pipes is not optimistic, and the operating rate has fallen by 4-5% compared with the beginning of December. PolyOne will bring many high-performance polymers and colorant solutions to the 7th China International cable and wire Exhibition (wire China 2016). The operating rate of other downstream industries remained at 54% - 62%, down 1-2 percentage points

the overall demand of the industry is not strong, coupled with the sharp decline in the PE market in the early stage, downstream factories mostly take a wait-and-see attitude, mainly with buy and use. As the contradiction between supply and demand is more prominent, the weak state of the demand side will also drag down the PE market to rise powerlessly and turn downward