At present, domestic plastics inventory is still high, and it is still in the inventory phase. At the same time, plastic futures prices are at a relatively high level after the Spring Festival this year, and there is limited upside for the market outlook. The market outlook needs to pay close attention to the changes in international oil prices and the actual impact of foreign device shipments on the domestic market.

In May, downstream demand for domestic plastics began to weaken, and agricultural film production gradually slowed down. However, at the same time, some PE production facilities are still expected to be routinely repaired this month, and the plastics market as a whole will show a weak supply and demand situation, or enter the stage. About two months relative to the low season consumption.

Agricultural film production enters phased low season

Judging from the historical laws, the annual May-June period is the relative low-season period for agricultural film production in China, and most domestic PE production facilities are also inspected from April-May, thus staggering the demand trough. Since the Ching Ming and Ming dynasties this year, as temperatures have risen rapidly, domestic orders for plastic film production companies have gradually decreased, and capacity utilization rates have also begun to decline. Since 70% of the linear plastics are used for agricultural film production, the rapid decline in demand will make the overall supply of the domestic plastics market larger than necessary.

The domestic film production has remained low, according to statistics, the current capacity utilization rate of the domestic film is only about 10%, only the production of individual enterprises in Northwest. With regard to the “two oils” plastic inventory situation, the staged tired bank caused by the May Day holiday still suppressed market sentiment, domestic plastics inventories were higher than the same period of previous years, and the destocking process was slightly slower.

The recent decline in the operating rate of agricultural film companies, the downstream view of the market outlook is different, on-demand procurement of raw materials. In particular, the price of “two oils” plastics has recently risen, and the downstream has started to wait and see. This has also aggravated the accumulation of domestic plastic stocks to some extent. As far as the overall price trend is concerned, the rebound in the current plastic period and the current price is limited, basically in line with the market's expectations for the off-season.

Domestic equipment centralized maintenance support is limited

While downstream demand is declining, major domestic olefin plants are also concentrated in the second quarter. According to statistics, in April, a total of 23 sets of 4.97 million tons of PE equipment were repaired, and most of the equipment was overhauled for more than 5 days. . In May, there were seven sets of equipment with a total of 2.07 million tons expected to be overhauled, and some of the equipments had a longer repair time or effectively reduced the supply of plastics, but this support was also very limited given that the downstream construction could not be increased.

On the supply side, according to statistics, about 607 million tons of new plastic capacity was put into operation worldwide this year, while the demand increase was only about 4.07 million tons, and there was an apparent oversupply pressure of about 1.37 million tons. As China is a plastic importer, imports account for about 40% of China's total plastic consumption, so the impact of domestic production capacity on the market is not significant. Major foreign new installations are concentrated in North America and are mainly concentrated in the second quarter. Plastics supply pressure will be mainly concentrated after the second quarter.

At the end of domestic production capacity overhaul, new capacity in North America will also be put on the market, and global supply pressure will be highlighted.

In addition, the international oil price continued to increase, causing the production cost of plastics to increase. Recently, major domestic manufacturers have increased their selling prices. However, due to the off-season consumption, the downstream demand is weak, the continuous depreciation process caused by continuous on-demand purchases, and the pressure on manufacturers to increase sales. Therefore, the rising prices formed by the rise in raw material prices are slightly insufficient.

In summary, the plastics market as a whole has entered the period of low demand during the year. The overall domestic inventory is still high, and it is still in the destocking phase. The overhaul of domestic production facilities has formed some support for the market, but the actual impact is limited. The domestic plastics market will enter a relative low season period of about two months. The current price of plastics futures is at a relatively high level after the Spring Festival this year, and there is limited upside for the market outlook. The market outlook needs to pay close attention to the changes in international oil prices and the actual impact of foreign device shipments on the domestic market.