Report Industry Investment Rating No relevant content provided. Core Views of the Report - The current supply and demand pattern of PE is weak. Supply is expected to increase due to the restart of multiple devices and potential import growth, while demand recovery is slow, resulting in limited support for PE prices. The overall trend is expected to be weak, with limited upside potential [1]. - In the short term, PE will mainly fluctuate with macro - sentiment and cost, but its weak fundamentals will restrict its upward movement. A put - option strategy is recommended as the current valuation is low, and further short - selling is not cost - effective [6]. - In the long term, the supply of PE is expected to further increase in the fourth quarter due to new device投产 plans, and without new demand - boosting policies, the weak supply - demand situation is likely to continue [8]. Summary by Relevant Catalogs Chapter 1: Core Contradictions and Strategy Recommendations 1.1 Core Contradictions - Supply side: Multiple devices are set to restart at the end of September, and the planned device maintenance in October is expected to decline rapidly, leading to increased supply. Additionally, due to the weak overseas PE market, the number of offers from North America and the Middle East has increased, and imports are expected to rise in October - November [1]. - Demand side: Although PE is entering the peak season, demand recovery is slow, downstream orders are limited, and enterprises are reluctant to replenish inventory. PE inventory, especially LLDPE inventory, is at a high level, and there is pressure on mid - and upstream sales. As a result, the PE basis remains at a discount [1]. 1.2 Transaction - type Strategy Recommendations - L - P spread narrowing strategy is under observation, proposed on September 19 [12]. 1.3 Industry Customer Operation Recommendations - Price range prediction for polyethylene: 7100 - 7350, with a current 20 - day rolling volatility of 6.18% and a 3 - year historical percentile of 1.0% [13]. - Inventory management: For enterprises with high finished - product inventory worried about price drops, they can short plastic futures (L2601) with a 25% hedging ratio at an entry range of 7250 - 7300, and sell call options (L2601C7300) with a 50% ratio at a range of 40 - 70 to reduce costs [13]. - Procurement management: For enterprises with low procurement inventory, they can buy plastic futures (L2601) with a 50% hedging ratio at an entry range of 7050 - 7100 and sell put options (L2601P7000) with a 75% ratio at a range of 30 - 60 to lock in procurement costs and reduce expenses [13]. Chapter 2: This Week's Important Information and Next Week's Events to Watch 2.1 This Week's Important Information - Bullish information: On Wednesday, affected by the Russia - Ukraine geopolitical situation, oil prices rebounded from the bottom, and polyolefins followed the upward trend [15]. 2.2 Next Week's Events to Watch - Monitor the release and implementation of "anti - involution" related policies after the Ministry of Industry and Information Technology and other 7 departments issued the "Work Plan for Steady Growth of the Petrochemical and Chemical Industry (2025 - 2026)" on Friday afternoon [17]. - The release of China's September manufacturing PMI index on September 30 [17]. Chapter 3: Disk Interpretation 3.1 Price - Volume and Capital Interpretation - **Internal market**: - Unilateral trend: This week, the PE disk first declined and then rose. On Wednesday, affected by the Russia - Ukraine geopolitical conflict, oil prices rebounded from the bottom, and polyolefins followed the upward trend, maintaining a volatile and strengthening state in the second half of the week [24]. - Capital movement: This week, the open interest increased compared with last week. The top five long - position holders increased their long positions, and the top five short - position holders increased their short positions. The net long positions of the top five profitable seats slightly decreased, and the main profitable seats changed from net short to net long this week [24]. - Basis structure: Although PE is entering the peak season, the slow recovery of downstream demand and insufficient order follow - up have led to weak spot prices, and the basis remains at a discount. As of Friday, the basis in North China was - 80 yuan/ton, in East China was - 40 yuan/ton, and in South China was + 100 yuan/ton [26]. - Month - spread structure: Due to the generally optimistic market expectations for the subsequent macro - situation, the L1 - 5 month - spread shows a contango structure. Driven by crude oil this week, the L2601 contract strengthened, and the 1 - 5 spread narrowed [30]. Chapter 4: Valuation and Profit Analysis 4.1 Industry Chain Upstream and Downstream Profit Tracking - With the continuous decline of PE prices, the production profits of various production lines have been compressed recently. Currently, only the coal - based production line maintains positive profits, while other lines are in a loss state. However, PE devices are not very sensitive to profit conditions, and short - term losses usually do not cause unexpected shutdowns [35]. Chapter 5: Supply - Demand and Inventory Deduction 5.1 Supply - Demand Balance Sheet Deduction - According to the current balance sheet, as device maintenance decreases, supply pressure will gradually emerge. With the expected increase in PE imports in October, total supply may rise rapidly, and inventory is expected to change from destocking to stockpiling. Attention should be paid to the actual rhythm of imports and the increase in demand [40]. 5.2 Supply - side and Deduction - The current PE operating rate is 81.84% (+ 1.48%). Multiple devices are set to restart at the end of the month, and the operating rate is expected to rise. From the maintenance plan, device maintenance in October is expected to decrease, and supply will increase rapidly. ExxonMobil's new device is expected to start production at the beginning of October [44]. 5.3 Import - Export and Deduction - Import: This week, the overseas PE price further declined, and offers from North America and the Middle East increased. Due to the weak overseas market, PE products are flowing into China at low prices. Considering shipping time, PE imports are expected to increase from late October to November [49]. - Export: Enterprises have high enthusiasm for expanding export channels this year, and PE exports have increased even in the off - season. However, the overall volume is still small and has little impact on the PE supply - demand pattern [49]. 5.4 Demand - side and Deduction - The current average downstream operating rate of PE is 42.17% (+ 1.21%). The operating rates of major downstream industries have all increased, with the agricultural film industry having a relatively large increase. PE downstream is still in the transition to the peak season, and demand is expected to increase month - on - month. However, since the peak season started late this year, the demand recovery is slow, providing limited support for PE [52].