China polyethylene market trend
In the China domestic market, major petrochemical makers are actively selling polyethylene (PE) to reduce inventories before Lunar New Year. But the government encourages citizens not to go back to their hometowns but to stay at their current location during the Lunar New Year holidays. Therefore, derivative makers are not decreasing production as much as usual years. Domestic prices are supported by buying to replenish inventories before Lunar New Year.
But from January, use of plastics has been restricted and operating rates of derivative makers might fall going forward. Further, recovery of demand after the Lunar New Year holidays is expected to be delayed, making it difficult for China domestic PE prices to increase. From 2020 to 2021, many new and expanded facilities in China are scheduled to start operations and supply is increasing. According to market sources, in 2021, PE facilities with capacity of about 5.4mil mt/year are scheduled to start up. Among these, Yanchang Yuneng Chemical's second low density polyethylene (LDPE) facility with capacity of 300,000mt/year successfully started up earlier this year. This facility is a high pressure production facility that uses coal as feedstock, similar to Shenhua's facility.