PE supply pattern changes in South China after Spring Festival

Before the Spring Festival holiday, a large number of post-holiday offers have appeared on the market. In addition to the general-purpose materials, there are also many unseen sources of goods, such as Hainan 7042, Jieyang 7042, Jieyang 8320, and so on, and these are all new products that will be put on the market.

After the holiday, a number of new plants are planned to be put into production in South China, totaling 1.8 million tons, namely 1.2 million tons for PetroChina Guangdong PC and 600,000 tons for Sinopec Hainan.

When these plants are put into production, the simple supply pattern of South China will have a big change.

First of all, the total capacity expansion is obvious.

Currently, PE production capacity in South China is around 4.09 million tons, with specific details listed below. When 1.8 million tons of new plants are put into production, the total PE production capacity in South China will increase to 5.89 million tons, with a capacity increase of about 44%.

Second, changes in the proportion of PE production.

Currently, PE plants are basically divided into four categories: HDPE/LLDPE, HDPE, LDPE and LLDPE. Among them, HDPE/LLDPE and HDPE have large capacity, accounting for 35% and 43% of the total capacity in South China respectively. When new plants are put into operation, the proportion of HDPE/LLDPE plants will increase to 43%, the proportion of HDPE plants will have little changes, while the proportion of LLDPE plants and LDPE plants will drop significantly. In addition, the HDPE/LLDPE plants mainly produce LLDPE products, that is, LLDPE production capacity in South China accounts for about 48% and the production supply will also increase at that time.

In addition, market share of PetroChina increases significantly.

In South China, local plants are mainly from Sinopec and joint ventures, most of which are joint ventures of Sinopec and overseas capital, and Sinopec's market share is still relatively high. The wholly-owned market share of Sinopec is about 28%. Moreover, as PetroChina do not have plants in South China, market source of goods is basically delivered from North China, the distance is remote and freight cost is high, thus it is not very advantageous in terms of price. When PetroChina Guangdong PC is put into production, PetroChina's market share can reach about 20%. Due to its large production capacity, the subsequent competitiveness of the market will be significantly enhanced.

The launch of the new plants means that the overall supply will increase, while the overall demand growth is mediocre. The new production capacity in South China, to a certain extent, will crowd out the market share of imported source and may still cause oversupply as a whole, suppressing the price in South China.