In the first half of this year, the prices of major domestic petrochemical products experienced fluctuations due to volatile international oil prices and the instability of related product costs. According to data collected from 36 large and medium-sized cities, the average prices for polyethylene, polypropylene, polyvinyl chloride, polyester chips, and butadiene rubber were 13,009 yuan, 12,180 yuan, 7,222 yuan, 11,351 yuan, and 16,990 yuan, respectively. These figures represent year-on-year increases of 10.81%, 6.95%, 2.88%, 6.63%, and 9.73%.
Looking ahead to the second half of the year, petrochemical prices are expected to remain elevated, largely due to sustained high oil prices in the global market. However, price movements will vary across different product categories, influenced by downstream demand and related market dynamics. Several key factors are likely to shape the petrochemical market in the coming months:
First, the continued high level of international oil prices is expected to support petrochemical pricing. Global refining capacity, especially for clean gasoline, has expanded slowly in recent years, leading to tight supply during peak seasons. This could push oil prices higher in July and August due to increased demand and declining inventories. Additionally, severe weather events in summer may disrupt offshore oil production and transportation, further supporting price increases. While oil prices may dip in autumn, strong demand will prevent a significant decline. In winter, rising heating oil demand could lead to another upward trend. Overall, oil prices are likely to stay high, providing ongoing support for petrochemicals.
Second, the broad application of petrochemical products and robust demand across industries like construction, textiles, electronics, and automotive are also contributing to high prices. China’s rapid economic growth has driven strong demand, with synthetic resin production increasing by 17.6% in 2006. Despite this, large imports still occur, highlighting the gap between domestic production and consumption. This demand-driven pressure is expected to keep petrochemical prices elevated over the long term.
Third, the performance of downstream industries significantly influences petrochemical prices. The chemical fiber and rubber product sectors saw strong profit growth in the first five months of the year, with chemical fiber output rising 17.9% and tire production up 24.9%. These trends suggest increased demand for raw materials, which supports higher prices. However, the plastics industry showed more modest growth, with output increasing only 14.2%, and profits rising at a slower pace than other sectors. This weaker performance may lead to more cautious purchasing behavior, potentially limiting further price increases for certain petrochemicals.
Fourth, the gradual implementation of export tax rebate policy changes may put downward pressure on some petrochemical products. The reduction of tax rebates for plastics and rubber products to 5% is expected to increase costs for downstream manufacturers, reducing their profitability and, in turn, affecting demand for petrochemicals. Products like PVC, which face overcapacity in some regions, may see slower price growth or even declines in the second half of the year.
Finally, the expansion of domestic petrochemical production capacity is also expected to impact market dynamics. Over the past five years, China's polyethylene production capacity has nearly doubled, reaching around 6 million tons. With additional capacity set to come online in the next few years, the market may experience increased competition, which could moderate price growth for certain products. The entry of new plants into operation is likely to have a notable effect on domestic supply and pricing in the future.
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