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Insight | Time: Jul 2 2020 4:28PM
HDPE uptrend may restrict in July
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The first half of 2020 has come to an end, PE market has fluctuated dramatically during the past six months. Judging from the current situation, the market has entered a relatively stable period in the high position, it is because the demand is very good, the inventory is not high, and the market rarely shows a significant retreat. However, as the price itself has risen much higher than the low point, the market is hard to move higher. In terms of HDPE, this phenomenon is particularly obvious.

In the current HDPE, the prices of most products have risen to more than 7,500yuan/mt except few relatively low-end products. Among them, since the demand for infrastructure has been good, market price the mainstream of pipe has been at above 8,000yuan/mt; other products such as film, blow-molding, and homo PP raffia have also risen to between 7,500-8,000yuan/mt due to recent import shipping problems. From the point of view of the whole HDPE, only injection is left, which still hovering around 7,000yuan/mt, but the general trend is also upward under the influence of other products.

However, with July approaching, it may be difficult for the HDPE market to repeat the upward trend of the second quarter. In addition to the fact that current prices have risen to a high position, the potential for increase on the supply side will also limit market gains. In terms of imports, recently, a large number of imports arrives steadily and the supply is relatively ample. And the supply of domestic goods will also gradually increase as some domestic PE plant would restart in July, will also gradually increase. Especially in late July, the increasing trend of domestic goods would be more obvious, which will impose strong restrictions on the HDPE price.

First of all, from the perspective of imports, a large number of goods which traders procures when the overseas price is low in March and April have been arrived intensively after May. According to the data, HDPE imports arrived in May has reached more than 800kt, which has reached a historical high. In June, some Iranian cargoes failed to arrive on time due to shipping, which has led to a decline in the number of arrivals. However, most of the delayed goods will arrive in July, and imports are expected to increase significantly in July compared with June, which will suppress the domestic HDPE market to a certain extent in July.

Secondly, since the beginning of May, many PE plants has been shut for turnaround in China, HDPE plants are also involved, and the number of turnaround has reduced at the end of June. At present, the 450kt/year HDPE/LLDPE plant of Shenhua Ningxia Coal II has restarted, and is now running for HDPE raffia 6094; the 300kt/year HDPE/LLDPE plant has also restarted, and may switch production line to HDPE; and Sinopec Sabic Tianjin (SSTPC) may restart in early-July. Moreover, as for the 400kt/year HDPE plant of Hengli Petrochemical I and 300kt/year HDPE plant of Zhejiang Petroleum & Chemical Co., Ltd. which have been put into production in 2020 has produced related HDPE products smoothly.

Restarted Plant Capacity (kt/year) Note
Shenhua Ningxia Coal II HDPE/LLDPE 450 restarted on Jun 25, shut on May 6, and is now running at HDPE raffia 6094
Sinopec Sabic Tianjin (SSTPC) LLDPE 300 shut on May 8 for around 2 month
Sinopec Sabic Tianjin (SSTPC) HDPE 300 shut on May 8 for around 2 month
Pucheng Clean Energy HDPE/LLDPE 300 restarted on Jun 28, shut on May 8
SECCO HDPE 300 plans to shut in early-July for around 10days
Shaanxi Yanchang ChinaCoal HDPE/LLDPE 600 shut on Jun 20 for around 50days

To sum up, from the perspective of HDPE, with the continuous arrival of imports and domestic PE plants restarts, the tight supply situation in July may ease slightly. The price upward trend brought about by the strong demand since the second quarter may be suppressed to a certain extent, and the upward potential of the HDPE market are also limited in the late market. Therefore, traders are suggested to be careful in purchasing the high-price cargoes.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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