PE under immense strains from increasing supply in Q4

Since the trial run of the HDPE plant of Ningxia Baofeng III at the end of August 2023 and its launch in September, China has not seen any new PE startups for a year. However, in the fourth quarter of 2024, several PE plants are expected to be put into production.

In the fourth quarter of 2024, new PE production capacity in China is expected to reach around 4 million tons, including Sinopec/Ineos Tianjin, Inner Mongolia Baofeng Coal Based New Materials and Yulong Petrochemical, with each petrochemical plant anticipating an average of three production lines to be launched. Additionally, there is one plant from Wanhua Chemical II. Although these plants are initially expected to be launched in the fourth quarter, there is a possibility that some may be postponed until the first quarter of 2025. Also, it's worth noting that some petrochemical plants have more than just these lines and have plans for additional units to be launched in 2025-2026.

According to current market situations, the 300kt/year HDPE/LLDPE plant of Sinopec/Ineos Tianjin has successfully completed the trial run for 35B but has since been shut down again, with the time for restart still pending. Other plants are expected to undergo trial runs.

If all 3.95 million tons of the new production capacity start up as scheduled, China's total PE capacity will reach 35.845 million tons/year, directly surpassing the 35 million tons mark, with an increase of 12.38%.

Focusing on the specific plants set to be launched, these are concentrated in the northern regions, especially in North China, specifically referring to Sinopec/Ineos Tianjin, Wanhua Chemical II, and the Yulong Petrochemical, totaling 2.45 million tons. Additionally, Inner Mongolia Baofeng contributes another 1.5 million tons, classified under the northwest region. As a result, the distribution of PE capacity across various regions in China will change as shown in the following chart.

LLDPE plants account for 70.89% of the total new production capacity. With the development of the market, the flexibility of switching between LLDPE and HDPE has increased. Thus, more petrochemical companies choose HDPE/LLDPE plants, providing them with greater options for product production in the future.

In addition, the UHMWPE (Ultra-High Molecular Weight Polyethylene) plant of Sinopec/Ineos Tianjin is expected to be put into production in the fourth quarter. Due to its long molecular chains and extremely high molecular weight, UHMWPE possesses unique qualities not found in other materials, such as high strength, impact resistance, wear resistance, chemical corrosion resistance, and low-temperature resistance. It is currently mainly used in four industries: sheet materials, pipes, fibers, and lithium battery separators, with applications across critical fields such as aerospace, national defense and military, marine engineering, rail transit, municipal construction, petrochemicals, metallurgical power, and new energy materials.

These new startup plans significantly change the supply landscape for PE in the fourth quarter. The market is still influenced by macroeconomic factors, but as the impact of macro news gradually weakens, the market will eventually return to its fundamentals. The significant supply volume may gradually exert pressure on the market outlook.