I. Geopolitical Conflict Escalation: Risk of Supply Disruption Soars
The direct trigger for this crude oil surge is the breakdown of US-Iran negotiations. Iranian media reported on June 1 that Tehran has suspended communications with Washington in response to Israeli airstrikes in Lebanon. More critically, Iran and its regional allies are considering fully closing the Strait of Hormuz and the Bab el-Mandeb Strait, which together carry approximately 20% of global oil shipments.
Although President Trump indicated that negotiations are ongoing and expects a memorandum of understanding to reopen the Strait of Hormuz within a week, the market remains skeptical. Historical experience shows that once geopolitical risk premium is injected into the crude oil market, it is difficult to dissipate quickly in the short term. SCI99 data shows that WTI fell to $87.36/barrel on May 29, but surged over 5% on June 1, fully illustrating the "news-driven" characteristics of the current crude oil market.
II. Cost Transmission Mechanism: The Complete Chain from Crude Oil to Polyolefins
As the furthest upstream in the plastic industry chain, crude oil price fluctuations transmit through the following pathways:
| Industry Chain Segment | Transmission Mechanism | Impact Level |
|---|---|---|
| Crude Oil → Naphtha | Direct cost push, naphtha prices follow crude oil closely | ★★★★★ |
| Naphtha → Ethylene/Propylene | Cracking unit costs rise, operating rates may decline | ★★★★ |
| Ethylene/Propylene → PE/PP | Polyolefin production costs increase, but constrained by supply-demand balance | ★★★ |
| PE/PP → Downstream Products | Cost transmission slowest, depends on end-user demand affordability | ★★ |
Key Conclusion: The cost-push effect of crude oil surge on polyolefins has a 1-2 week lag. Currently, SCI99 monitoring shows that plastic raw material prices for woven bags have diverged: the Northeast China market fell, while other markets rose by 10-165 yuan/ton, indicating that cost transmission is occurring, but demand has not yet fully responded.
III. Supply-Demand Dynamics: Low Supply Combined with Geopolitical Premium, PP/PE Prone to Rise but Resistant to Fall
According to SCI99's morning briefing on June 2, the PP supply side industry operating rate remains low, and supplies in some regions are tight. This supply-demand pattern, combined with crude oil surge, creates a "dual-driver of supply and demand":
Supply Side: Domestic PP/PE industry operating rates are at seasonal lows, maintenance of some units has not yet ended, and social inventory is at a moderately low level.
Demand Side: Downstream industries such as plastic woven, BOPP, and injection molding have entered the traditional off-season, but the pull effect of the "trade-in" policy on home appliances and automotive industries continues, and demand resilience remains strong.
Cost Side: After the crude oil surge, the cost advantage of coal-to-olefins (CTO) and propane dehydrogenation (PDH) routes will become more pronounced, but oil-based olefin routes face enormous cost pressure, which may trigger a new round of production cuts.
IV. Outlook: Polyolefin Price Ranges and Risk Warnings
Based on the above analysis, I make the following predictions for the next 2-4 weeks:
PP (Raffia): The mainstream price range is expected to be 7,800-8,200 yuan/ton, with the midpoint shifting upward by 200-300 yuan/ton. The core drivers are crude oil cost push + low supply, but caution is needed as the off-season may drag down demand.
LLDPE (7042): The mainstream price range is expected to be 8,500-8,900 yuan/ton, with the midpoint shifting upward by 150-250 yuan/ton. Agricultural film demand is at its annual low, but packaging film demand is stable, and cost transmission is relatively smooth.
Risk Factors: ① US-Iran negotiations unexpectedly reconcile, crude oil gives back gains; ② Downstream demand remains weak, cost transmission blocked; ③ Low-priced imported materials impact the domestic market.
