PE track the movements of feedstock

Recently, polyethylene market keeps in range-bound, the overall trend is relatively weak and one of the main factors affecting the market is the fluctuation of upstream raw material prices. As the feedstock coal and crude oil have seen large declines in a short period of time, the PE market, which is greatly affected by fluctuations in the cost, has also fallen.

From the perspective of coal, with the gradual implementation of the national coal control policy, the price of thermal coal continues to decline, and the cost of coal-based polyethylene shows a downward trend. The profits of coal-based PE has rebounded significantly compared with the previous low. In the near future, coal price is in narrow range-bound, and the cost of coal-based polyethylene has temporarily entered a relatively stable stage. In the late period, traders are still suggested to pay attention to whether there is still a further downward trend in coal.

From the perspective of crude oil, as OPEC+ and IEA predict that the supply of crude oil continues to recover, crude oil may turn into a surplus pattern as soon as the end of 2021. In addition, the United States and some other countries have planned to release strategic petroleum reserve (SPR) and put it on the agenda. Moreover, the Federal Reserve's Taper has led to the strengthening of the US dollar. Therefore, international oil prices have fallen sharply. Recently, US has announced to sell crude oil from strategic petroleum reserve and the overall release scale is far less than market expectations, and thus oil price moves higher slightly. However, the overall upward space for oil prices is not large, and oil price may maintain in consolidation in the short term, waiting for the response of the OPEC+. Therefore, in the short term, with the supply and demand side of polyethylene remaining stable, oil and coal prices have a considerable impact on polyethylene market, especially when oil prices enter the point of time when they turn from strong to weak, it is particularly important to pay attention to the changes of the raw material end.

From the perspective of supply, the operating rate of PE continues to rebound in Nov as less plants shut for maintenance and plants which have lowered their operating rate previously have operated at higher rates, and the overall supply increased slightly. In the later stage, the change in plant operation is relatively limited, and the new start-ups and pre-production plants are still in the trial run stage, and the contribution to supply is small and the impact is limited before the end of 2021. Therefore, in the later period, the supply of polyethylene may stable-to-higher.

From the perspective of seasonal demand, the mulching film is at its off-season, and demand of the greenhouse film is lackluster. Most downstream buyers purchase low-price materials to cover their rigid demand. With the weakening of PE prices, downstream buying interest is relatively poor and most traders are standing watching.

Generally speaking, due to the recent decline in raw material prices, PE market is weak consolidation as a whole. The fluctuation range of supply and demand is small, and downstream is not active in purchasing. PE market may keep range-bound, and traders are suggested to pay attention to changes in the prices of raw materials.