2025Polyethylene: Pressing Forward Under Pressure, with Challenges Ahead in Q1 2025

Polyethylene: Pressing Forward Under Pressure, with Challenges Ahead in Q1 2025

In the first three quarters of 2024, no new polyethylene facilities were commissioned, except for the Xinjiang Tianli Hi-Tech's 200,000-ton EVA facility, which began its initial high-pressure production, contributing to polyethylene capacity. The fourth quarter marks a concentrated period for new facility launches, with a total of 3.3 million tons coming online. This includes an additional 800,000 tons of HDPE capacity, 650,000 tons of EVA capacity producing LDPE (counted as new polyethylene capacity), and an added 300,000 tons of LLDPE capacity, along with 1.55 million tons of The full-density device capacity（capable of producing both LLDPE and HDPE）. The total polyethylene production capacity in China is expected to reach 35.778 million tons in 2024 (including 1.95 million tons from LDPE/EVA co-production facilities), reflecting a year-on-year growth rate of 10.08%. With the full release of production from Inner Mongolia Baofeng and Yulong Petrochemical in December, the supply pressure in January is anticipated to be significant.

Table 1: Domestic Polyethylene Production Commissioning Statistics for 2024

In the first quarter of 2025, as the new facilities commissioned at the end of 2024 gradually ramp up their production and previously halted facilities restart operations, supply pressure is expected to quietly increase. Additionally, there are still many PE facilities scheduled for commissioning in the first quarter (see Table 2). Although some companies may choose to delay their commissioning dates to alleviate short-term market impacts, the overall commissioning of new facilities will continue to have a significant effect on supply, and production capacity will remain in a phase of rapid growth during the first quarter.

Table 2: Domestic Polyethylene Commissioning Plans for Q1 2025

According to the existing maintenance schedule (see Table 3), there are fewer maintenance shutdowns planned for Q1 2025, with no shutdowns scheduled for February. Excluding long-term shutdowns that have been inactive for over a year, the affected capacity is 4.935 million tons, reflecting a decrease of approximately 69% compared to Q1 2024. The planned maintenance loss shows a substantial reduction, indicating a resurgence in supply for the upcoming quarter.

Table 3: Planned Maintenance Schedule for Domestic Polyethylene Enterprises in Q1 2025

Outlook for Q1 2025

As new facilities continue to ramp up production, the market is witnessing an increase in spot supply, along with accumulating inventory by production enterprises and a decrease in the number of maintenance shutdowns. It is expected that the supply pressure for polyethylene (PE) will increase, leading to a more relaxed overall supply-demand relationship, which may put downward pressure on spot prices.

Specifically, in January, the newly launched Yulong Petrochemical, Sino-British Petrochemical, and Baofeng have already produced qualified resources. Wanhua Chemical, Inner Mongolia Baofeng, and Shandong New Era are expected to gradually commence trial operations and increase production, leading to an anticipated increase in supply. Additionally, demand is projected to further shrink after mid-January, which may result in a certain degree of price decline.

In February, the Chinese New Year holiday at the end of January and the beginning of February will bring demand down to its lowest point of the year. Coupled with increased inventory pressure for enterprises after the holiday, there may be a stronger willingness to promote clearance sales, causing the market focus to shift downward. As downstream factories gradually resume operations and production enterprises accelerate their pace, a rebound in prices may occur by the end of February.

In March, the operating rates of downstream industries are expected to gradually recover, while the number of temporarily halted maintenance facilities may increase. This could alleviate supply pressure to some extent, allowing the market to regain confidence.