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Short-term market contradictions are not prominent. Although the price of the main 2501 contract of plastic futures has not fluctuated much recently, the trend is relatively strong, and the overall fluctuation is maintained in the range of 8,000 to 8,200 yuan/ton. In addition, the basis of the 2501 contract is also very strong. The basis was 155 yuan/ton at the beginning of October, and the basis was 285 yuan/ton as of November 4. In the past month, the basis has remained in the range of 150 to 360 yuan/ton. During the same period, the basis of its "brother" variety PP2501 contract showed a weakening trend. In some areas such as Shandong, the spot price of PP wire drawing is even lower than the disk price, and the basis is negative.
At this stage, plastics are still in a situation where the reality is OK, the basis is strong but the expectations are not optimistic. There are not many contradictions in the short-term plastic market, and the basis may be repaired following the rebound of sentiment.
Peak season of demand supports firm spot prices of LLDPE
The spot underlying of plastic futures is film-grade LLDPE, and the main downstream application areas of domestic LLDPE film materials are agricultural film (ground film and greenhouse film) and packaging film. Since September, the demand for greenhouse film in northern China has gradually entered the peak season. During this period, taking Shandong as an example, due to the seasonal release of demand for greenhouse film, the spot price of LLDPE film materials in Linyi, Shandong Province rose from 8060 yuan/ton in early September to a high of 8450 yuan/ton in early October, and then fell back to the recent 8360 yuan/ton. The spot price rose by 300 yuan/ton, an increase of about 3.7%. In addition, the data performance on the supply side has played a strong supporting role in the spot price of LLDPE. According to the data of the General Administration of Customs, from January to September, the cumulative supply of LLDPE was 12.14 million tons, an increase of 0.3% over the same period last year, with a limited increase.
Although the domestic polyolefin industry capacity release cycle has not yet been completely completed, the window period from the beginning of this year to October is the window period for the release of new domestic PE capacity. As of November 4, no new PE or LLDPE capacity has been put into production to release supply increments this year. From the perspective of LLDPE production, data released by institutions show that from January to September, LLDPE production was 8.28 million tons, with a cumulative year-on-year growth rate of 0.4%. The operating load of existing units is not high due to poor profits, and the maintenance efforts of the units this year are also relatively large, which has correspondingly led to a higher loss of LLDPE than in previous years. Since the third quarter, Jilin Petrochemical's 280,000 tons/year LLDPE unit was overhauled in August and has not yet resumed production; since mid-October, Ningbo Huatai Shengfu's 400,000 tons/year full-density polyethylene (FDPE) unit, Sino-Korea Petrochemical's 300,000 tons/year LLDPE unit, and Fujian United's two 450,000 tons/year FDPE units totaling 900,000 tons/year have been shut down one after another, and the planned overhaul will last for two months.
The growth rate of production release from domestic LLDPE existing units has slowed down, and there is not much supply from the import end. According to the data of the General Administration of Customs, from January to September, the domestic LLDPE import volume totaled 3.856 million tons, which was basically the same as the same period last year; the import volume of all varieties of PE was 10.19 million tons, with a year-on-year growth rate of 3.7%. Although new production capacity has been put into production overseas this year, such as the 460,000 tons/year unit of Canada Nova, which was put into production in March, and other 1.07 million tons/year HDPE units such as Shell in the United States, JG Summit in the Philippines, and Sina Chem Chabahar in Iran, which were put into production in April and September respectively, due to the poor profits of overseas ethylene cracking units since this year, especially in the first half of the year, the corresponding output of PE is limited, so the number of overseas PE sources including LLDPE imported into the Chinese market is not large.

The subsequent increase in the PE supply side cannot be ignored

Since the beginning of this year, the PE industry as a whole has shown a weak supply and demand pattern, and the upstream industry has spontaneously reduced production to maintain a basic balance between supply and demand. If the export volume of PE is excluded, the apparent supply of all varieties of PE from January to September is 29.8 million tons, with a year-on-year growth rate of 1.7%, and the apparent supply growth rate has gradually declined during the year. From the perspective of the demand calculated from inventory data, the overall PE demand from January to September was also relatively weak. The PE demand in September was 3.33 million tons, a year-on-year decrease of 6.9%. The cumulative year-on-year decrease from January to September was 1.2%.
Compared with other varieties, this year is not only the weak demand data for plastic varieties, but also the weak demand for other sectors such as building materials, steel and textiles. The main reason is that the previous overseas high interest rate policy restricted the demand for economic activities and the domestic real estate periodic downward cycle led to weak domestic demand. From November to December, the demand is likely to continue to be tepid. From the perspective of agricultural film demand, after mid-November, with the end of the seasonal peak season, the demand gradually weakened. The demand for injection molding, hollow plastic products and various packaging film bags that are closely related to residents' daily life is mainly rigid replenishment. Although the market's expectations for domestic policy stimulus are still strong, coupled with the fact that most overseas countries have entered a cycle of interest rate cuts to revive the economy, the transmission strength of the stimulus policy to improve demand this year may not be obvious, and the demand for plastic products such as PE itself is limited by the macroeconomic cycle.