China’s old plant closure hype quickly fades in polymer markets

China’s recent pledge to shutter aging petrochemical facilities briefly lifted sentiment in the polymer markets in mid-July, but the optimism faded quickly. Gains were seen mainly during the week of the announcement—the third week of July—when futures and some spot markets reacted positively. Since then, weak demand and abundant supply have reasserted pressure across PVC, PP, PE, and PET markets, making the policy boost little more than a “flash in the pan” in the short term.

Policy optimism short-lived

The Ministry of Industry and Information Technology’s (MIIT) plan to phase out production units over 20 years old sparked initial hopes for a tighter market. However, traders report that the effect on buying activity was fleeting.

A polymer trader commented, “The market reaction was like a straw fire—bright for a moment, but gone quickly. Buyers are still only meeting basic needs, and there’s no follow-through in demand.”

Sources noted that the policy’s long-term impact remains uncertain, with no immediate signs of major shutdowns. A large global producer’s executive recently remarked that, while restructuring is being discussed, “we haven’t seen too much actually happening” in China yet.

PVC: Gains reversed as demand falters

The capacity-cut plan supported a notable rise in September PVC futures during the policy announcement week, driving local prices slightly higher for a second consecutive week. This was fueled by Beijing’s growth signals targeting key sectors such as steel, petrochemicals, and building materials.

This positive sentiment continued into late July, keeping local and export prices stable to slightly firmer. However, actual downstream demand remained weak, with buyers reluctant to accept elevated prices and downstream operating rates staying low.

By early August, sentiment weakened as futures gave back gains, seasonal headwinds such as high temperatures and heavy rains suppressed demand, and supply rose following plant maintenance completions. Domestic prices declined amid waning buying interest, while export offers for ethylene-based K67 dropped slightly, and acetylene-based offers held steady. Weakness in the property sector further dampened demand, leading buyers to adopt a cautious, wait-and-see stance that erased the earlier gains.

PP: Flat-to-soft amid off-season lull

September PP futures surged in mid-July, buoyed by expectations around industrial policy support and the MIIT’s capacity-cut plan. However, downstream activity remained subdued with buyers cautious and mostly engaged in basic procurement. Despite futures-led optimism, oversupply and weak demand weighed heavily on the market. This trend persisted through late July and early August, as futures retreated from their highs and local as well as export prices held stable to slightly lower.

Delays in new capacity startups provided little relief, and soft seasonal consumption compounded pressure. High inventory levels and tariff concerns further dampened buying interest. Traders summed up the situation as “pressure from both ends—high supply and low demand,” with deal flow remaining thin and crude oil prices also dragging sentiment down. By mid-August, the market remained flat to softer, mirroring the prior week’s dynamics.

PE: Minimal impact from capacity-cut news

The PE market showed little sustained reaction to the policy announcement. Despite a visible rebound in Dalian futures and a slight decline in upstream inventories during the announcement week, PE prices remained broadly stable to softer across both import and domestic markets.

Some suppliers attempted sentiment-driven price hikes, but real buying interest was limited as most purchasers remained price-checking rather than actively procuring. Through late July, local prices continued a three-week downward trend amid sluggish demand and ample supply.

By early August, prices mostly held steady with only slight firmness noted in LDPE grades. Rising ethylene feedstock costs were largely offset by slumping crude oil and falling futures, keeping overall sentiment subdued and purchases focused on replenishment.

PET: Brief policy-led firmness followed by bearish shift

Following weeks of decline, China’s domestic PET bottle market saw slight price gains around the time of the capacity-cut announcement, supported by policy signals and seasonal demand improvements. Nonetheless, high inventories and oversupply continued to limit upside potential, prompting producers to consider curtailing run rates to stabilize prices.

This cautious tone extended through late July, with prices mostly steady and supported by rising crude oil and monomer costs, though downstream demand remained weak.

By early August, the PET market turned more bearish as upstream feedstock costs fell sharply alongside crude oil, and buying interest waned. Most market participants adopted a wait-and-see approach amid ongoing cost and demand uncertainties.

No quick fix for oversupply

Market participants agree that the closure of older plants—if implemented—could gradually address chronic oversupply, but timelines are unclear. Past campaigns have seen uneven enforcement, and political or local economic considerations may slow the pace.

Until then, players expect the polymer markets to remain vulnerable to seasonal softness and structural demand weakness, with no strong trigger for a rebound in the short term.