Since the beginning of the year, commodities have generally risen, and the prices of some commodities with strong macro attributes and contracted supply have hit record highs. The two major cost sources of plastics and PP, Brent crude oil has increased by more than 40% during the year, and the price of thermal coal once broke through the thousand yuan mark. However, the cumulative increase in the two disk, affected by the expansion cycle has not yet ended, supply pressure is still large, while the macro-inflationary effect has not been effectively transmitted to the downstream consumer side, so that plastics, PP high short-lived. In view of the high oil prices, coal prices difficult to fall, the cost of the bottom and upward drive is insufficient, betting on unilateral effect may not be the best.
In the previous period of observation, we discussed the reasons for the reversal of PP and plastic spreads, while in the past January the two spreads have fluctuated significantly, this period we want to explore the reasons behind the abnormal fluctuations, as well as the future changes in the spread between the two thinking.
First of all, let's review the reason why plastic performance is obviously weaker than PP since April this year, which is most directly reflected in the changes in inventory of the two. At that time, PE port inventory continued to rise to a record high in mid-April, superimposed on the impact of the release of high demand for PE prices. In a single month, the overall PE inventory of coal chemical enterprises was nearly 40%, but PP coal chemical inventory was actually lost. Although PP was also affected by demand at high prices, what could not be ignored was the outbreak of incremental export demand of PP production enterprises and the surge in overseas orders during the epidemic. One data is quite amazing. Domestic PP exports increased about 4 times from March to May compared with the same period last year! The different supply and demand performance made PP's premium on plastics reach about 700 yuan in mid-May.

Then the protagonist of the story becomes plastic! Crude oil strengthened in June to support the bottom of polyolefin, and the valuation repair brought about by the previous weak performance of plastics is naturally stronger than PP. Superimposed on its own fundamentals there is less than expected production, over time, the industry-wide inventory continues to decline, the lower the inventory, the more can stimulate the demand for replenishment. When it was revealed that PE's May import data was lower than expected again, it ignited this round of rapid rise in plastics after mid-June. PP is relatively less sensitive to imports. In addition, Gulei Petrochemical and others were put into production in August. In the second half of the year, the pressure on production capacity was gradually released and the rebound was not strong. As a result, the premium on plastics continued to decrease. Yesterday, the main force was only higher than that of 300 yuan.
So the strength of the supply and demand stage is the reason for the obvious change in the spread between the two, then the future spread trend is also closely related to the fundamental changes in the two. The first is the key factor in imports, May imports fell sharply mainly in the early long-term internal and external disk upside down and in February the United States Texas device large-scale shutdown. It is reported that the planned arrival volume of PE and PP may still be small from June to July, and most of the external PE supply quotations are upside down. Considering that PE import dependence is nearly 50% (of which LLDPE import dependence is more than 40%), while PP import dependence is about 20% (of which standard PP wire drawing imports are less), even if affected by the same subject matter, PE is still more driven than PP.
Secondly, from the two new capacity and maintenance arrangements to measure, the second half of the new capacity base is still large. PE2021 new capacity of about 5.7 million tons, the first half of the production of 1.2 million tons, PP in the second half of the new capacity of 2.85 million tons, the annual new capacity of about 17.4 percent. Judging from the equipment maintenance, PE maintenance is slightly more intensive than PP, and 3 sets of equipment with LLDPE 7042 grade in PE have maintenance plans in July. P and P device maintenance, the subsequent PP device maintenance is not strong, the operating rate may be improved. Therefore, from the combination of new capacity, maintenance and imports, the future PE supply growth rate is lower than PP.
Finally, on the demand side, PE downstream demand for non-durable consumer goods accounts for a relatively large proportion, and demand is more rigid, which is less affected by the macro-economy. However, the overall downstream demand in July-August part of the downstream into the off-season, orders and start or save down expectations. And PP traditional downstream plastic weaving will also enter the season off-season, while the marginal demand incremental categories such as automobiles, home appliances demand by the lack of core problems affected or continued. The China Automobile Association reported that the problem of chip tension will be alleviated as soon as the end of the third quarter. In addition, the output data of some smart home appliance industries are also affected by the shortage of chips. According to the Bureau of Statistics, the output of color TV in May decreased by 3.2 year-on-year, and the output of household refrigerators decreased by 4.2 year-on-year. So there is no significant expected difference between the two in terms of demand.
Therefore, the core point of plastic and PP strength is still on the supply side. At present, PE pressure wants to be relatively small. If the later data continue to support, it is obviously possible to reduce the PP discount.