【Analysis of market conditions】：
First of all, this year's demand is weak but overall stable, and the most important thing is that downstream profits are generally poor. Therefore, in this context, downstream companies generally take measures that are willing to purchase at a low price, but are basically unwilling to purchase high-priced goods. At the same time, due to the large expansion of supply-side production capacity this year, a weaker basis will continue to be a major trend. This will prompt traders to adopt a short-selling basis arbitrage model, which is also not conducive to the increase in market prices. The short-term polyethylene market is expected to fluctuate weakly.
Second, before the fourth quarter, the general market background demand was ordinary, the supply gradually expanded, and the downstream profit of the industrial chain was limited. In particular, the impact of the large expansion of PE production capacity on the market cannot be ignored. Although it is not absolutely negative, the digestion of new production capacity requires downstream purchases to increase, either by rigid demand expansion or by increasing inventory levels. However, under the current weak demand, downstream companies will only be interested in low-priced sources and resist high-priced sources even if they stock up. Therefore, the market performance will be a long shocking market. The key to the second half of the year will be the new downstream order trend. We do not believe that the current weak state of downstream orders in the entire industry chain will continue until the end of the year. The centralized execution of orders will drive the downstream replenishment of the market, and the current upstream supply end of the industry chain has low inventory, and it is prone to price break-through range fluctuations caused by the rise in volatility caused by low inventory.
Third, fiscal easing, monetary easing, and inflation are major trends, and there should not be too much hesitation. In the off-season of the first half of 2021, terminal demand will not be able to expand further, leading to a decline in terminal operating rates and reduced stockpiling, which may cause commodity prices to weaken in the second quarter. However, the downstream related demand of PE remains stable in the second half of the year, and the order execution period in the second half of the year will drive PE to pick up and strengthen.