PE plant operating rate plunges to 9-year low

Over the past month, China domestic PE plant operating rate has plummeted, with the operating rate of 68.87% on April 12, falling directly below the 70% level, the lowest at least since Dec 2013. 

The operating rate has dropped sharply, on the one hand, it is because that the PE producers cut production since March due to high oil prices, which have been basically implemented up to now; on the other hand, it is currently close to the spring turnaround season of some petrochemical plants.

At present, the shutdown plants in China are as follows, involving a total production capacity of 7.11 million tons.

In addition, there are also some plans to shut for maintenance in April-May, with a total production capacity of 1.56 million tons.

So, in the case of such a low operating rate, does it mean that the opportunity for PE to rebound has come?

Although supply is tight, demand is being suppressed at the same time. On the one hand, affected by the pandemic, logistics and transportation in some regions had been restricted, both the cross-regional allocation of raw materials and the delivery of finished products have been affected. Moreover, some reservoir areas in Jiangsu and Zhejiang are in closed or controlled areas, resulting in certain restrictions on downstream delivery. On the other hand, spring ploughing in the north basically ends in mid-April, the peak demand season for agricultural plastic film is coming to an end, and the demand is gradually weakening in the later period.

Currently, PE plant operating rate is on the low side, China domestic supply decreases significantly and demand weakens gradually. Moreover, international crude oil price fluctuate widely in the current turbulent international situation, the market still has to balance the relationship between the cost side and the supply and demand side, and PE market may keep range-bound.