Review of imported PE market in H1 2022
In the first half of 2022, the imported PE market has changed from strong to weak, but the overall fluctuation range has been also small. In the first quarter, the market fluctuated higher, and declined as a whole in the second quarter.
January: Market price moved up slightly. Supported by the strong RMB futures-spot market and rising crude oil, new offers from suppliers inched up and traders offered higher slightly. The price spread between RMB market and PE CFR China was relatively balanced, and the trading sentiment was lukewarm.
February: Negotiations during the Spring Festival holiday were thin. After the holiday, crude oil rose sharply, RMB futures-spot market went up evidently on the first day after the festival, which obviously boosted the mentality of the PE CFR market. However, not many downstream workers resumed to work, and market transaction was limited. Subsequently, RMB futures-spot market fell, which suppressed the trading atmosphere of the PE CFR market. PE CFR China market was significantly higher than the RMB market, and market transaction was poor.
March: Under the relatively tense international situation, crude oil prices rose sharply, driving the PE CFR China market to move up, and some traders even ceased orders and were reluctant to sell at previous lows. Then, due to the decline in the RMB futures-spot market, PE CFR China market was under pressure and weakened. The price spread was too large, and downstream demand was sluggish. In the last ten days, the crude oil fluctuated violently, PE CFR China market also fluctuated significantly, and the overall transaction was limited.
April: RMB futures-spot market moved downward, and weighed on the PE CFR China market mindset. The price spread between RMB market and PE CFR China market remained, and downstream buying interest was weak. In addition, it was difficult to pick up goods affected by the epidemic in some main port areas, downstream demand was weak, and the transaction was rare. All parties were standing watching.
May: Market price continued to decline, RMB depreciated and the price spread was too large. Downstream was resistant to the high price, RMB market was relatively weak and the US dollar procurement costs of first-hand traders have increased. Downstream demand was bearish, and buyers preferred to purchase yuan-denominated materials and get the tax refunded.
June: PE CFR China market maintained the downward trend. The market was stable in the early stage, and the price fluctuations were small. In the second half of the month, due to the sharp drop in crude oil, RMB market was weak, which suppressed the PE CFR China market. Downstream demand was limited.
In the first half of 2022, the prices of LLDPE and HDPE film was basically the same, while the price of LDPE was much higher, and the price spread HAS maintained for a long time.
When it comes to the PE CFR China market, it is inevitable to mention the current import situation. According to customs data, from January to May 2022 (the data in June has not been announced yet), China's total PE imports were 5.546 million tons, a year-on-year decrease of about 15.74%, of which imports from April to May were all less than 1 million tons. Since March 2018, the monthly import volume of PE in China has been above 1 million tons. The import volume has been greatly reduced, and the import dependence has dropped significantly.
The main reasons for the decline in imports are as follows:
1. The total production capacity of China domestic PE is increasing and the self-sufficiency rate is obviously increased, which has an obvious impact on imported materials.
2. With the continuous rise of international oil prices, plants at home and abroad have been affected, resulting in a reduction in overall output and a certain percentage reduction in imports.
3. PE CFR China market price is always higher than the RMB market.
Taking LLDPE as an example, from January to June 2022, LLDPE CFR China market price was 200-900yuan/mt higher than the RMB market. Due to the high price spread, plants preferred to purchase yuan-denominated materials and get the tax refunded, and the advantage of imported materials has been greatly reduced;
4. The international market price is much higher than the China domestic market.
Taking LLDPE as an example, the price in Europe and the United States was generally $600-700/mt higher than the China domestic price, and the high price spread also makes most overseas plants tend to sell to Europe and the United States.
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