Will LDPE prices continue to rise?

Since August, the LDPE market has experienced a slight rebound, although the overall increase has been limited and of short duration. However, the market sentiment is relatively active, and the willingness to sell at low prices is relatively low. So, Will LDPE prices continue to rise?

From the current market supply perspective, the overall supply of LDPE remains relatively abundant.

Since August, the production proportion of domestic LDPE has risen to over 10%. However, due to some plants experiencing shutdowns for switching of production and plant failure, the proportion has now decreased to 9.26%.

Currently, the shutdowns are primarily temporary, and these shutdowns account for only 170kt, or 4.3% of total LDPE production capacity, and the duration of these temporary shutdowns is relatively short, with restarts expected soon.

Moreover, the LDPE/EVA plant at Sierbang Petrochemical and Shaanxi Yanchang ChinaCoal II have been producing EVA for a long-term, which has had little impact on the market. However, there are two plants worth noting recently. The first is the 200kt/year LDPE plant of Sinopec Yanshan PC has switched to EVA production. The second is the 200kt/year of EVA plant of Xinjiang Tianli Gaoxin Petrochemical switches to produce LDPE 1840H since Aug 1.

The plant of Sinopec Yanshan PC is essentially operating on a regular production schedule, as historical data shows that it produces EVA for about half of each month to maintain its sales rhythm. In contrast, the switch of Xinjiang Tianli Gaoxin Petrochemical has been influenced by pricing and profitability factors. In 2024, the overall price trend for EVA has been declining, and by late June, EVA prices fell below LDPE prices. Although there was a slight recovery in July, since early August, LDPE prices have increased slightly, causing EVA prices to return to a state of being lower than LDPE prices. Under these circumstances, the plant is gradually switching production when conditions allow to ensure profitability. It will be important to monitor whether other plants producing EVA decide to switch to LDPE in the future.

Looking at the demand side, with the upcoming traditional peak season, there are preliminary expectations for some early demand. This includes plans from several major plants to stock up in advance. Overall, under the traditional peak season in Sep and Oct, the demand outlook for LLDPE is relatively active. A significant portion of LDPE demand is related to its use in blend production with LLDPE for film materials, which is expected to drive a certain increase in LDPE demand as well. Additionally, considering the traditional seasonal demand for greenhouse films, coatings, and decorative materials, there is potential for a rebound in demand during September and October.

Overall, the future supply of LDPE is relatively abundant. However, due to the low prices of EVA, there is a possibility that some EVA plants may switch production. On the demand side, there is a slight expectation of an increase as the traditional peak season approaches. It is believed that, whether currently or in the future, the overall supply and demand show an increasing trend. It is necessary to observe which side's advantages become more prominent to guide the market direction. The initial expectation is that the likelihood of LDPE experiencing another price surge is relatively low.