Polyethylene market will weaken consolidation
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The domestic polyethylene market remains stable due to tight supply from manufacturers, but the high pricing is facing resistance from downstream sectors. While upstream crude oil prices have been under pressure, the expected increase in manufacturer supply may lead to a weakening trend in the polyethylene market in the near future.
In a market where numerous equipment overhauls have reduced supply, polyethylene prices are holding strong, with some producers continuing to raise factory prices, particularly for low-density polyethylene. Despite this, there is still a level of rigid demand, especially for agricultural mulching and high-melt injection applications in November, which has provided some support to current price levels.
However, the elevated polyethylene prices are not easily passed on to downstream industries. This has led to squeezed profit margins for downstream companies, reducing their willingness to start new operations and resulting in sluggish shipments. As a result, the upward movement in polyethylene prices is being hindered.
Currently, ex-factory prices among polyethylene producers are mixed, and overall market turnover remains weak. Nevertheless, with limited inventory pressure on companies and a constrained supply in the market, polyethylene prices have remained relatively high.
According to reports, Fushun Petrochemical’s ethylene plant and its downstream facilities are expected to resume operations in November, which could boost market supply and shake investor confidence. Additionally, the commercial development of shale oil in the U.S. has led to an oversupply of crude oil. It is estimated that U.S. commercial crude oil inventories rose by 2.5 million barrels last week, marking the seventh consecutive week of increases. This has contributed to a continued decline in international crude oil prices, further weakening the cost support for polyethylene.
Taking all these factors into account, the polyethylene market is likely to experience a period of weakness in the short term, with prices showing a volatile but downward trend.