Short-term LDPE supply increase drags down China domestic prices

China's LDPE prices led the market decline, breaking 10,000yuan/mt in East and North China due to surging supply. Key drivers: maintenance restarts raised operating rates, pushing production proportion above 10%, while Sierbang��s switch from EVA to LDPE added supply. Weak off-season demand and cautious buying exacerbated the downturn. Near-term outlook remains soft unless supply adjusts.

Recently, China domestic PE market has shown an overall trend of gradually moving lower, with LDPE performing particularly weakly. Some mainstream grades in both East China and North China have already broken below the 10,000 yuan/ton price level, clearly leading the decline among other PE grades (although other grades have also weakened modestly, the decline is far less than that of LDPE). The overall market trading atmosphere has become cautious, and downstream buyers are mostly adopting a wait-and-see attitude.

The fundamental reason why LDPE has become the leading decliner in this round of decline is the concentrated supply release on the domestic supply side in the short term. Specifically, there are two main factors:

On one hand, most plants that were previously shut down due to raw material shortages, routine maintenance, or sudden failures have recently resumed operation and are running normally. For example, Sinopec Maoming and Wanhua Chemical have successively completed maintenance, leading to a notable increase in overall operating rates.

According to incomplete statistics, the overall production proportion of domestic LDPE plants has now rebounded to above 10%, basically returning to normal levels. However, the production release from this round of concentrated restarts has quickly shifted market spot supply from tight to loose, significantly increasing inventory pressure on traders. Some holders, in order to alleviate capital occupation pressure, have actively lowered prices to sell, further intensifying downward price pressure.

On the other hand, 200kt/year LDPE/EVA unit of Sierbang Petrochemical has recently shifted production from EVA to LDPE. This unit has conventionally produced EVA since startup but has the flexible production capacity to switch between EVA and LDPE. This switch has directly brought an additional increment of approximately 15,000 tons per month to the LDPE market. Moreover, as a new product, it is being offered at low prices to capture market share. This additional supply and low prices have further disrupted the supply-demand balance, accelerating the downward movement of the price.

While spot prices are weakening, most downstream agricultural film and packaging film plants are in the off-season for demand, generally supporting purchases with small amounts of need-based buying, with insufficient willingness to actively build inventories.

In summary, the core driver of the short-term price decline in LDPE is the concentrated return and incremental release of supply–the restart of previously maintained units combined with the switch at Sierbang's unit has jointly led to a significant increase in market resources. Against the backdrop of no notable improvement on the demand side, the pattern of strong supply and weak demand is unlikely to reverse in the short term, and the price still faces the possibility of moving slightly lower. At the same time, expectations of Sierbang possibly switching back to EVA should also be considered.