When will PE price bottom out under economic downward pressure?

Introduction: the cumulative growth of industrial value-added data above Designated Size published by the National Bureau of statistics has continued to decline year-on-year. Through the analysis of industry by industry, we can finally find out the impact of trade war on Global trade and on China’s import and export trade from the continuous decline of China’s industrial export delivery value growth. The export of plastic products, especially polyethylene polypropylene, has intensified The industry is deeply affected, and the price bottom is still on the way.

 

I. the added value of industries above Designated Size continues to decline

 

The latest October data released by the International Bureau of statistics shows that the downward pressure on the economy is still high. In October 2019, the added value of industries above designated size increased by 4.7% year-on-year (the growth rate of the following added value is the actual growth rate after deducting the price factor), 1.1 percentage points lower than that in September. From a month on month basis, in October, the added value of industries above designated size increased by 0.17% over the previous month. From January to October, the added value of industries above designated size increased by 5.6% year on year.

 

As shown in the figure, in terms of the accumulated value-added of industries above Designated Size, the trend of continuous decline in recent two years shows that the economic downturn continues. From a year-on-year perspective, the added value of industries above Designated Size in August was 4.4%, falling below the 4% level for the first time, a new low in 17 years, and 5.8% in September. The economic downturn seemed to be suspended, and another 5% in October reached 4.7%. The downward pressure on the economy continued to increase. The U.S. economy has been outstanding. For three consecutive months, the manufacturing PMI of ISM was below the boom and bust line of 50. The initial value of quarterly GDP fell and consumption fell, making the global economic growth slowdown likely to enter into “resonance”, trade war and other uncertain factors, increasing downward pressure.

 

II. The industrial added value of raw material end and terminal is not optimistic

 

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In October, the value-added of chemical raw materials and chemical manufacturing industry increased by 3% year-on-year, while that of rubber and plastic products industry increased by 3.9% year-on-year. Obviously, the growth rate of downstream products industry is faster than that of upstream raw materials. The difference between the growth rate of the two industries narrowed for three consecutive months, because the decline rate of products industry in October is faster than that of raw materials. In October last year, the price of PE, PP and other plastic raw materials began to decline. The growth rate of rubber and plastic products was significantly lower than that of raw materials. Generally speaking, with the decline of the price of raw materials, the cost of end products decreased. From the perspective of the growth of plastic products, the current situation of the product industry is slightly better than last year.

 

From January to October, the added value of chemical raw materials and chemical manufacturing industry increased by 4% year-on-year, while that of rubber and plastic products industry increased by 4.8% year-on-year, showing a continuous downward trend in the year. The growth difference between the two is the same as that of last month, which is larger than that of previous months, indicating that the decline in the price of raw materials supports the growth of terminal output. The added value of plastic products industry is slightly higher than that of the same period of last year, both year-on-year and cumulative year-on-year, indicating that the downstream industry of plastic products is better than that of plastic raw materials.

 

III. under the trade war, the growth rate of export delivery value continued to accelerate and decline

 

Export delivery value: refers to the value of products exported by industrial enterprises (including those sold to Hong Kong, Macao and Taiwan) by themselves or entrusted to foreign trade departments, as well as the value of products produced by foreign investors such as samples, processing, assembling and compensation trade. The value of export delivery is different from that of export. Export is essentially a demand side indicator, which measures the total value of the products exported in the current period, that is, it is not necessarily the current production; while the value of industrial export delivery is the value of the products produced in the current period, delivered to the foreign trade operation department or self export, so it can more represent the real prosperity of the supply side in the current period.

 

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The trade war cannot be ended. Global trade is greatly affected, which not only affects the U.S. economic downturn, but also more affects China’s economic growth. In terms of industrial export delivery value, the logistics of chemical raw materials and chemical products industry has declined year-on-year or cumulative year-on-year, and the more serious is that both the year-on-year and cumulative ratio are negative, and the expansion trend is intensified. The rubber and plastic products industry is slightly better, showing a negative value year on year, and the cumulative ratio is close to a negative value. The data shows that it affects the export of China’s chemical industry and rubber and plastic industry. The more uncertain the trade situation is, the more cautious enterprises are expecting to reduce current production. After all, the plastic industry still has a certain share of exports to the United States. Instead, PE and other raw materials are imported into the United States more.

 

To sum up, the macro data reflects that the export of rubber and plastic products industry continues to be depressed, and the prices of PE and PP plastic raw materials are still not optimistic. In the case of macro downturn, it is better to follow the trend. In terms of the ex factory price index of synthetic materials and plastic products, they continued to decline year on year, and there is no bottom signal yet.

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