Polyethylene Market Fluctuates at High Levels

I. Demand Side: Lackluster Peak Season; High Prices Dampen Purchasing Enthusiasm

September marks the start of the traditional "Golden September" peak consumption season to polyethylene. Operating rates in downstream industries have seen a slight month-on-month recovery, indicating a temporary upturn. Specifically, the agricultural film sector has begun its production and stockpiling cycle to greenhouse films, and the packaging film sector has seen slight demand improvement driven by pre-Mid-Autumn Festival stocking. However, the overall boost from the peak season has been limited, primarily due to the pressure exerted by high raw material prices. Polyethylene prices remain high, severely squeezing processing margins to downstream manufacturers; meanwhile, fierce competition in the end-product market makes it difficult to companies to pass upstream cost pressures down the supply chain. Additionally, with tight liquidity, small and medium-sized downstream companies are generally adopting a cautious "purchase-on-demand" strategy rather than engaging in extensive restocking. Consequently, the demand boost during this traditional peak season has been insufficient, acting as a key bearish factor limiting price increases.

II. Supply Side: immediate Spot Tightness; Medium-term Pressure from Increased Supply Looms

Domestic polyethylene supply is currently tight in the short term, providing strong support to spot prices. Plant shutdowns—such as those at Tarim Petrochemical and certain facilities in Huizhou—have caused a slight decline in the sector's overall capacity utilization rate. Production trends vary by grade: output of LDPE and LLDPE has fallen month-on-month, while HDPE output has seen a slight increase. Furthermore, previous over-selling by some producers has further tightened spot supplies; combined with low inventory pressure at manufacturing vegetation, market prices have remained relatively firm. Looking ahead, the pattern of tight immediate supply is expected to persist; however, as October approaches, previously idled production units will gradually resume operations. Domestic polyethylene output will steadily increase, and the projected rise in medium-to-prolonged supply will gradually materialize, leading to emerging supply-side pressure.

III. Cost Side: Oil prices rose before falling, yet high costs continued to provide support

During this period, international oil prices followed a direction of initial gains followed by a decline, with the overall average price shifting significantly higher compared to the previous period, thereby providing sustained, strong cost-based support to the polyethylene market. Early in the week, oil prices rose due to heightened supply risks caused by a disruption to a Saudi crude oil pipeline and geopolitical harassment by Houthi forces. Subsequently, prices retreated from their highs—closing the week reduce—as oil-producing nations in the Persian Gulf signaled a de-escalation of tensions, the repair of the Saudi pipeline progressed faster than expected, and the market absorbed the bearish impact of the Federal Reserve's first interest rate hike of the year. With crude oil prices remaining high, domestic polyethylene producers raised product quotes in response to costs; combined with low inventory levels, this created a strong willingness among companies to maintain prices, establishing a solid floor to market pricing.

IV. Bullish and bearish factors counterbalance; market fluctuates at high levels

Currently, the polyethylene market is locked in a standoff between bullish and bearish forces, with no clear directional direction; high-level fluctuations are expected to continue in the short term. On the bullish side, geopolitical conflicts in the Middle East continue to provide a cost floor to crude oil. Petrochemical companies are determined to maintain prices, market inventories remain low, and seasonal demand to agricultural film provides underlying support, all of which significantly limit the possible to price declines. On the bearish side, high raw material costs continue to squeeze downstream processing margins, the recovery of end-user consumption remains sluggish, and willingness to stock up is low, creating significant resistance to further price increases. Future market trends will largely depend on external variables; key factors to monitor include the pace of Federal Reserve rate hikes, the evolution of geopolitical conflicts, and international crude oil price movements, as these will dictate the future direction of the PE market.