PE price slump deepens as supply-demand mismatch worsens

Recently, the domestic PE market has shown frequent fluctuations, but the overall price trend remains stable with a slight weakening bias. Extending the observation period and taking LLDPE as an example, it is evident that prices this year have fallen to their lowest point since 2021. A comparison of data from the past two years highlights a significant downward shift in the market: the price of LLDPE in East China was around 8,700yuan/mt during the same period of 2024, while it has now dropped to approximately 7,000yuan/mt, representing a price difference of nearly 1,700yuan/mt. The primary driver behind this trend remains the persistent pressure from the fundamental pattern of growing supply and weak demand. The current supply-demand dynamics have yet to see fundamental improvement, and market conditions continue to face downward pressure.

First, from the cost perspective:

Although raw material costs-crude oil and naphtha-have dropped significantly compared to the same period last year, the simultaneous decline in PE product prices has instead amplified cash flow losses. The contrast is striking: During the same period, oil-based PE cash flow was on a recovery track, driven by rising product prices, and successfully turned profitable by year-end. Now, however, losses have deepened to around -900 yuan/mt. While there may still be some flexibility through co-production of other ethylene derivatives (such as styrene and MEG), such deeply negative cash flow has put plants in a difficult position: shutting down risks permanently losing market share, while continuing production consumes the company's lifeline. It is also this extreme pressure that has created the paradoxical logic behind this year's stable-to-lower price trend rather than a collapse-any further downward price movement could trigger large-scale shutdowns, forming a fragile balance.

Compounding the cost-side challenges is the persistently high inventory level. In 2024, the inventory level stood at 605kt, which was already not low. However, against the backdrop of fluctuating higher prices, the market generally expected inventory to continue being digested-and in fact, it was indeed in a de-stocking channel. In 2025, however, the inventory level has reached 710kt. Combined with falling prices and deep losses, this situation not only suppresses market sentiment but also shatters confidence. What's more, this chart only represents the inventory of the polyolefin (mainly PP and PE) in Sinopec and PetroChina. If the inventory of coal chemical enterprises, private enterprises, joint ventures, and circulation links is included, the resulting supply pressure will be even more severe.

In summary, a comparison of data from the past two years shows that collapsing costs coupled with continuously accumulating inventories due to weak demand ultimately point back to the fundamental logic of oversupply and weak demand, making it difficult to resolve the price decline dilemma. However, this year's sequential shutdowns of Sinopec Yanshan PC and Sinopec Zhongyuan PC (reportedly with no imminent restart plans), along with INEOS' exit from certain petrochemical collaborations, have opened up alternative development possibilities for the market.