In March, polyethylene varieties all emerged from a market trend of “continuous rise+periodic correction+new highs”. According to the testing conducted by Shengyi Society, the average price of LLDPE (7042) was 6616 yuan/ton on March 1st and 9016 yuan/ton on March 30th, an increase of 36.27%. LDPE (2426H) had an average price of 8633 yuan/ton on March 1st and 11416 yuan/ton on March 30th, an increase of 32.24%. The average price of HDPE (5000S) on March 1st was 7317 yuan/ton, and on March 30th it was 9987 yuan/ton, an increase of 36.49%.
The core driving factor of the market: the resonance of cost surges and supply contraction expectations caused by geopolitical conflicts, where the cost side is the direct driving force and the supply side is strong support.
Cost side: The surge in crude oil prices has ignited the market, causing a sharp increase in cost pressure.
The soaring price of crude oil: In early March, the situation in the Middle East escalated, and shipping in the Strait of Hormuz was blocked. International oil prices soared, directly pushing up the raw material cost of polyethylene. The strong support on the cost side was the first driving force for the market to start. The production costs of domestic oil to PE enterprises have significantly increased, prompting them to adjust their factory prices and drive up the spot market.
Supply side: Dual contraction of internal and external supply, exacerbating the mismatch between market supply and demand.
Blocked import sources: The Middle East is the source of nearly 50% of China’s polyethylene imports, and the shipping risks in the Strait of Hormuz have increased, directly affecting the pace of Middle Eastern goods arriving at ports. The expectation of tight supply has directly pushed up polyethylene prices.
Domestic plant load reduction/shutdown: Some domestic PE plants have reduced or shut down due to raw material issues, and the substantial contraction of the supply side has further strengthened the logic of price increases.
Low inventory operation: Supply contraction combined with traders’ reluctance to sell, social inventory continues to decrease, and the market has a stronger ability to bear price increases under the low inventory pattern.
On the demand side: the stage is weak, but no significant suppression has been formed.
March is the traditional off-season for demand, and the recovery rate of downstream agricultural film and packaging enterprises is relatively slow. However, against the backdrop of rising costs and supply contraction, the impact on the demand side is weakened, and the market is more concerned about the shortage expectations on the supply side. Therefore, the weak demand has not changed the upward trend.
In the short term, the core logic supporting this month’s market has not completely dissipated, and the market is likely to maintain a high volatility pattern, but caution should be exercised against the risk of a pullback.
Supporting factors still exist: the situation in the Middle East has not yet eased, the expectation of supply contraction is still present, and the expected decline in PE imports to ports in April indicates continued supply side support.
Accumulated pullback risk: After a significant increase in prices, downstream companies’ purchasing willingness continues to weaken, and the resistance to high price transactions increases. If supply recovers or oil prices rebound in the future, the market may experience a temporary pullback.
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