The domestic CPE (chlorinated polyethylene) market has experienced a mix of factors this month, leading to an overall stable but slightly sluggish trading environment. Despite the continued tightness in raw material supply, the outlook for the CPE market remains uncertain due to the end of the downstream consumer season. This has led to a continuation of the consolidation trend, with manufacturers facing pressure on both costs and demand.
In September, the raw material market for CPE remained under tight supply conditions. Most manufacturers found it challenging to procure raw materials, with some even halting production. At the beginning of the month, the downstream demand was relatively strong, allowing smooth shipments. However, as the month progressed, demand began to decline, prompting many manufacturers to reduce their operating rates. While most companies maintained some level of inventory, the expected stockpiling before the National Day holiday did not materialize.
Despite the cold atmosphere in the broader plastics market, manufacturers were reluctant to adjust prices, even though upstream raw materials remained scarce. Current prices for 135A grade CPE range from 12,000 to 13,800 yuan per ton, while 135B is priced between 13,000 and 14,000 yuan per ton.
Several key factors have influenced the supply and demand dynamics in the domestic CPE market during September:
Firstly, China's CPE industry chain still lacks full self-sufficiency. The industry heavily relies on imported raw materials, a challenge that became more pronounced during the maintenance of Liaohua’s dedicated HDPE production line. While larger domestic producers can absorb higher costs by using expensive imported materials, smaller enterprises have been forced to cut production or shut down.
Secondly, rising raw material prices have added to the burden. With global crude oil prices reaching over $83 per barrel, the cost of HDPE—accounting for the majority of CPE production costs—has surged. Each ton of CPE requires approximately 0.65 tons of HDPE, and the price increase for special HDPE materials has pushed up production expenses significantly. This has placed immense pressure on domestic producers, who are now dealing with both high costs and weak sales.
Thirdly, the downstream market performed abnormally this year. The PVC product market, which is a major consumer of CPE, saw weaker-than-expected sales during the summer and autumn seasons. As a result, the plastic modifier market, another key buyer of CPE, also suffered from reduced demand.
Additionally, China’s CPE market is unique in its structure. Weifang Yaxing Chemical, the world’s largest CPE producer, holds nearly 60% of the domestic market and 40% of the global share. Other producers in Shandong also contribute significantly to the domestic supply, making the market highly regionally concentrated. Many small-scale producers follow a price-following model, with only minor adjustments made by some local players. Overall, the market remains stable, with little significant change observed.
Looking ahead, demand from the downstream market in early October is expected to remain flat. The tight supply of CPE raw materials is unlikely to ease soon. By late October, when Liaohua’s HDPE production line resumes operations, and with the peak season for PVC products having passed, the CPE market may face increased selling pressure, leading to a gradual downward trend in market conditions.
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