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Insight | Time:Nov 29 2017 12:03PM
HDPE injection welcomes the long-waited rise
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In the past two months, China domestic PE sources had been trended into a widely divided trends. LLDPE and LDPE sources were contained in range-bound for around two months; HDPE film and blowmolding grades were rising robustly; HDPE pipe grade was staying steadily at a relatively high rate in the year; HDPE injection and raffia grades stagnated at relatively low rates.

HDPE injection grade has gathered more attention in recent days, as more positive factors are figured out in this product and may work together to push prices higher in the days to come.

1. Price at historical low
Price of HDPE injection grade is the lowest among all HDPE sources. The just above 10,000yuan/mt rate is far below that of HDPE film, blowmolding and pipe grades, which are kept above 11,500yuan/mt, and has great potential to go up in late market.

Take HDPE injection 8008, produced by PetroChina Dushanzi Petrochemical as an example. Price of specification had climbed up from a bottom place around 9,100yuan/mt to the highest of 12,000yuan/mt near the end of 2016, up continuously by 2,900yuan/mt in the year. But in 2017, price has fallen by 2,950yuan/mt, down from highest of 12,200yuan/mt to 9,250yuan/mt, during which market once struggled hardly at around 10,000yuan/mt.

Till recently, HDPE seems strongly empowered to break previous psychological line. People are paying attention to the product, when other HDPE sources have jumped up greatly in 2017 already, and they expect a similar bullish trend for HDPE injection as happened in 2016.

2. Production proportion lowers year on year
Comparing the production proportions of HDPE injection-grade by all China PE producers in 2015, 2016 and 2017, supply of the grade is contracted mostly this year. The proportion of the grade keeps decreasing from over 8 percentage in 2015 to below 6 percentage in 2017. In 2015, high production proportion and the overall bearish fall in commodity market around the year has dragged price down significantly; in 2016 the portion has decreased evidently, resulted in much lower HDPE injection stocks in the year, and in 2017 the share reduces further. The reduced supply has laid a foundation for price lift.

  2015 2016 Jan-Nov 2017
Average production-proportion of HDPE injection-grade 8.28% 6.28% 5.84%

3. Less production scheduled in H2 2017
The supply cut could also be told by the production schedules of major HDPE injection producers in China, PetroChina group and coal-chemical producers considered the largest. Observing production conditions of PetroChina producers since the second half of 2017, only PetroChina Fushun Petrochemical has been steadily producing HDPE injection-grade, and PetroChina, while PetroChina Lanzhou PC, PetroChina Sichuan PC and PetroChina Daqing PC hardly produced and supplied the grade, and PetroChina Dushanzi PC had just modestly produced; seeing coal-chemical producers, Ningxia Baofeng did not produce or schedules to produce HD injection in 2017, Shenhua Baotou has been producing HDPE injection 8007 for around one month in Oct, and Shaanxi Yanchang had no schedule for the grade in H2 2017.
Among the mentioned plants, Shaanxi Yanchang’s production shift has a biggest impact on the sectional market. Shaanxi Yanchang has once been the largest HDPE injection coal-based producer in China with its typical product HDPE injection T60-800. The production stops unexpectedly in H2 2017.

Major HDPE injection-grade producers' production in 2017
  Producer Product specification Production of HDPE injection in Jan-Oct 2017 Current production and schedule of HDPE injection
PetroChina Dushanzi 8008/8920 Modest volume No schedule in the rest of 2017
Fushun 7260/2911 Steady supply of HDPE injection Steady supply of HDPE injection
Lanzhou 8008 Hardly produced No schedule
Sichuan 8008/7260 Hardly produced No schedule
Daqing 8008 Hardly produced No schedule
Coal-chemical producers Shenhua Baotou 8007 Produced for one month Have produced HDPE injection for one month, now for LLDPE
Ningxia Baofeng 8008 No schedule for HDPE injection in the rest of 2017 Switched to produce LLDPE
Shaanxi Yanchang T60-800 Steady in H1 2017, hardly produced in H2 2017 No schedule

4. Traditional peak season
Based on different applications of HDPE injection, its sales peak mainly appears in Nov-Jan, China Lunar New Year holiday-Mar, Sep-Nov, etc. And these time may shift with end users’ market, promoting and harvest. It means demand for HDPE injection is likely to keep healthy, based on the very limited supply.

Given all the aspects mentioned, price HDPE injection is nearly at its historical low point, and domestic supply is evidently reduced given the still healthy demand. The current concern is whether demand will expand further and import volume could stay as low, one of which verified is enough for market to rise up, probably from 10,000yuan/mt to 10,500yuan/mt and higher.
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