PE: weak demand weighs more than turnaround plans

In Jun, PE market moves down affected by the pullback of upstream crude oil, the decline in the cost side, and the poor downstream demand.

The operating rate of PE has declined in June, as many plants shut accidentally in the second half of the month, mainly LLDPE/HDPE plants and LDPE plants. The supply side has tightened slightly. At the same time, according to the current information, more plants are expected shut for maintenance in Jul, such as Shenhua Yulin, PetroChina Daqing PC, and Shaanxi Yanchang ChinaCoal and so on, and the supply pressure in the late market has weakened.

In terms of demand, downstream is in the traditional slack season, and orders are limited. Moreover, the unblocking of Shanghai has not boosted demand. Although the logistics and transportations has improved compared with the previous month, the downstream transaction has not been significantly improved under the overall weak market situation. Since the ex-works price of petrochemical plants is relatively high and more plants shut for maintenance, market supply is tight and the downward potential of market price is limited. Downstream is in wait-and-see stance, and buying intention is not strong except for some replenishment requirements.

In general, the fundamental support of oil price itself still exists, and the macro systemic risk has limited impact on crude oil for the time being. The short-term oil price may still consolidate at highs, which will still support the cost side of PE. At the same time, upstream plants shut for turnaround has increased, and the pressure on the supply side has been further weakened. However, the sluggish situation on the demand side is difficult to improve, and the oversupply situation still exists. Therefore, the market outlook remains volatile, and the demand may remain sluggish.