I. Overall Trend
According to the sample prices monitored by business associations, LLDPE composite prices declined in the second quarter of 2019. LLDPE’s factory price dropped from 8,600 yuan/ton on April 1 to 7,900 yuan/ton on June 30, and its quotation fell by 700 yuan/ton, or 8.16%. Compared with the same period last year, LLDPE ex-factory quotation fell 14.69%. Spot PP prices generally weakened in the second quarter. Domestic producers and traders T30S mainstream offer price dropped from 8816.67 yuan/ton on April 1 to 8533.33 yuan/ton on June 30, a decline of 3.21%. PP spot price fell by 7.41% compared with the same period last year. Overall, the trend of PP and PE in the second quarter is basically the same.
II. Market Analysis
PE: PE spot market declined in the second quarter as a whole. At the beginning of the season, due to the reduction of VAT tax points, the rise of futures and the impact of petrochemical prices, prices have kept up to a certain extent. In addition, due to the shortage of individual supply sources in some regions, prices have risen in the region. However, futures L1905 began to fall sharply in the middle of the year. Petrochemical stocks were at a high level in the month, and the pressure of depot reduction was great. The peak season of demand for agricultural film had passed, and the digestibility of raw materials was limited. The multi-profitable situation led to the reduction of multi-plant prices. Affected by several price cuts in the month, the mindset of the operators has weakened, and they are mainly short-sighted in the future market.
In the quarter, Sinopec’s inventory declined, futures rebounded for a short time, the downstream market was replenished, the market demand increased, the business mentality improved, and spot prices showed a certain pullback. With the futures dive again, the market continued to decline as a whole. Some petrochemical companies canceled the price increase sale, and gradually lowered prices. The market mentality weakened again. Prices did not recover until the end of the season. Futures and crude oil have both risen, the international economic environment has eased, petrochemical factory prices have been raised to boost market confidence, and the market trading atmosphere has improved. However, end-users just need to give priority to the purchase of more low-priced sources, high-priced transactions are still difficult, and price increases are restrained. Until June 19, the linear market quoted 7733.33 yuan, the lowest price in the first half of the year. On the whole, LLDPE is still weak.
PE upstream: According to the analysis of business associations, ethylene prices in Asia showed a general trend of first rising and then falling in the second quarter. At the beginning of the quarter, international crude oil shocks rose, Russian crude oil pipeline exports to Europe declined sharply, European and American crude oil futures rose sharply, and the United States cancelled the national and regional exemption for importing Iranian crude oil from early May, resulting in a reduction in crude oil stocks, but concerns about slowing economic development limited the upward space for oil prices. The rise in crude oil has given some support to the market price of ethylene. At the end of the season, although the international crude oil rose, the demand for ethylene market was light and the market was full of wait-and-see atmosphere. Businessmen pay more attention to the situation of supply and demand after the festival. Downstream styrene continued to fall, the price of ethylene glycol reached, unable to support ethylene, ethylene market prices continued to fall.
For PE downstream enterprises, the start-up rate of downstream film materials gradually declined in April, and the start-up rate of functional film enterprises maintained a low level of about 1-30%; the start-up rate of enterprises was maintained at about 3-40% after the end of plastic film demand; the follow-up of plastic film manufacturers was insufficient, large factories maintained a high-load start-up, and the start-up rate of enterprises maintained at about 3-40%. In June, the demand for film materials continued to be weak, the accumulation of manufacturer orders was limited, a small amount of low start-up was maintained, the demand for sunlight film increased compared with the earlier period, and the demand for plastic film ended, and the manufacturer gradually turned to shutdown.
PP upstream: At the beginning of this quarter, downstream demand for propylene has just improved, accompanied by high domestic inventory, businesses downgraded their offer focus to cope with high inventory. The traditional overhaul peak season started in May alleviated the pressure of propylene inventory in time and alleviated the outstanding contradiction between supply and demand. Domestic spot market supply has decreased and the trend has rebounded. In addition, in May, international crude oil prices were affected by tensions in the Middle East and OPEC production cuts, and supply risks continued to rise, which gave propylene a certain cost-side support and a strong rise. In June, the international crude oil market shocked greatly, and propylene market was affected to a certain extent. At the end of the month, with the rebound of crude oil prices, propylene oxide in the lower reaches of propylene remained stable, acrylic acid prices rose slightly after the downturn, butyl octanol prices rose slightly, some refineries shut down, downstream plants also reduced production, refineries again tight supply, strong willingness to bid. At the end of the quarter, propylene market had a strong trend and continued to rise, which supported the cost of PP. In the second quarter of 2019, propylene upstream of PP showed a concussive upward trend.
PP: This quarter PP spot offer trend concussion downward. In the second quarter, due to the impact of changes in propylene supply, PP peak fell. With the gradual caution of the downstream mentality, the enthusiasm for stockpiling has weakened, and the support for PP prices has begun to decline. At the same time, the introduction of new production capacity has significantly increased the supply of PP. Statistics from professional organizations show that in May this year, China’s polypropylene production was 1.755 million tons, a decrease of 63.7 million tons, a decrease of 3.5%, an increase of 109.3 million tons, an increase of 6.64%. By mid-May, due to the boost of futures prices, it turned to a stalemate and began to shake the whole market. In June, the domestic PP market first restrained and then rose. It was reported that Sinopec’s long-standing stock in the first half of the year dropped to below 800,000 tons at the end of June, and the social stock kept low. On the other hand, in the second quarter, the domestic PP production facilities were not overhauled much, and imports were in a steady stream, which led to intensified competition among all parties and continuous bidding and promotion. PP prices declined all the way until mid-June, when strong macro expectations for the G20 summit at the end of this quarter boosted business mindset. Affected by the easing of Sino-US trade war and the recovery of crude oil, PP prices rebounded and some petrochemical enterprises raised their quotations. But the strength is insufficient. On the whole, the trend of PP is still weak.
Import and Export: In May 2019, the domestic PE import and export volume declined, but continued to increase year-on-year. Statistics show that in May 2019, domestic PE imports totaled 1.419 million tons, a decrease of 51.9 million tons, or 3.53%. The year-on-year increase was 73.1 million tons, an increase of 5.43%, including LLDPE imports of 434,300 tons, a decrease of 17.7 million tons, a decrease of 3.91%, a decrease of 6.74 million tons, a decrease of 0.15%; HDPE imports of 675,100 tons, a decrease of 30.9 million tons, a decrease of 4.38%, an increase of 62,700 tons, an increase of 10.23%; For 310,000 tons, the ring-to-ring ratio dropped by 33,300 tons, or 1.06%, while the year-on-year increase was 118,000 tons, or 3.96%. From the above data, we can see that PE imports in May decreased significantly, but compared with the same period last year, high and low pressure are still higher.
Statistics show that in May 2019, China imported 402.7 million tons of polypropylene, a decrease of 38.2 million tons, or 8.66%. It also decreased 18.7 million tons, or 4.44% over the same period last year. From January to May 2019, China imported 2.0459 million tons of polypropylene, an increase of 267.9 million tons over the same period last year. On the export side, in May 2019, China exported 35370.47 tons of polypropylene, up 8803.214 tons annually, up 33.14%, down 2824.9 tons, down 7.40%. From January to May 2019, China exported 1515.54 million tons of polypropylene, a decrease of 3,533.87 tons, or 2.28% over the same period last year. From the above data, we can see that in May 2019, the impact of foreign sources of goods decreased, domestic PP imports dropped significantly, and export volume increased, but compared with last year, it is still in a high region.
3. Future Market Forecast
PE business analysts believe that the second quarter of the PE market trend oscillation, although the end of the quarter rebounded, but the range is not large. At present, the trend of crude oil is weak, affecting the market mentality, manufacturers have continuously lowered prices, market cost support is weak. Petrochemical stocks are still at a high level although they have fallen back. Parking overhaul in some factories can relieve supply pressure to a certain extent. The third quarter is the traditional peak season, the downstream agricultural film start-up rate has increased, the demand for plastic film has opened, and some factories have the demand for spare goods. The market demand in the third quarter is better than that in the second quarter. PE market is expected to fall first and then rise in the third quarter.
PP business analysts believe that the domestic PP market trend in this quarter shocks, quarterly end quotations driven by macro expectations and strong rise, powder merchants cautiously optimistic. At the same time, it has recently been boosted by the rising cost side of crude oil and propylene and the rise of futures. In addition, some factories have begun to plan maintenance, and the domestic market has the expectation of tight supply. Downstream stocks are limited in enthusiasm improvement, demand to maintain just-in-demand strategy, smooth delivery. Many good points at the end of the quarter are difficult to solve the rising pressure of PP supply and demand. It is expected that the trend of PP will continue to oscillate narrowly in the near future.