1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - In Q1, the polyolefin and propylene markets generally trended upward in a volatile manner. The ongoing Iran - US conflict led to significant increases in crude oil and LPG prices, providing strong cost support and causing supply to tighten due to widespread plant shutdowns and production cuts. Looking ahead to Q2, the core focus will be on the evolution of the geopolitical situation and its impact on the supply - demand pattern. If the conflict persists, the olefin chain is expected to remain strong; if the situation eases, the decline in prices will be limited. In the long - term, the supply - demand re - balance of polyolefins and propylene needs to be re - evaluated after the supply gradually recovers [1][3]. - The price ranges for Q2 are estimated as follows: L2605 is expected to be between 7,800 - 9,600 yuan/ton, PP2605 between 7,800 - 9,800 yuan/ton, and PL2605 between 7,500 - 9,500 yuan/ton. Short - term, the three varieties are expected to remain in a high - level volatile pattern, and it is recommended to wait and see. For monthly arbitrage, consider long 9 - short 1 spreads for L and PP. For inter - variety arbitrage, widen the P - L spread on dips, and there is no clear directional driver for the PP - PL spread [5]. 3. Summary by Relevant Catalogs 3.1 Market Review - In Q1, the polyolefin and propylene markets generally trended upward in a volatile manner. By March 20, the closing price of the plastic main contract rose 36.25%, polypropylene rose 42.08%, and propylene rose 51.50%. The market can be divided into two stages: before the conflict (January 5 - February 27), the three varieties showed an oscillatory recovery; after the conflict (March 2 - present), the prices rose exponentially due to cost support and supply contraction [6][7]. 3.2 Core Concerns 3.2.1 Refinery Production Cuts and Polyolefin Supply Reduction - Due to the conflict, the shipping in the Strait of Hormuz was blocked, and the oil and gas fields in the Middle East reduced production. Refineries reduced production defensively, leading to a significant reduction in polyolefin supply in March - April. The PE plant operating rate dropped from 87.95% to 80.07%, and the weekly output decreased by 8.97%. The PP plant operating rate dropped from 75.49% to 70.50%, and the weekly output decreased by 6.61%. If the conflict persists, the polyolefin plant maintenance losses will further increase in April [15]. 3.2.2 Threat to PDH Plant Raw Material Supply - The PDH plant has been significantly affected by the geopolitical conflict. Before the war, the PDH plant operating rate had dropped to around 65%. After the conflict, the LPG price soared, further compressing the PDH plant profit. If the conflict persists, PDH plants may shut down, driving up the prices of PP and propylene. If the situation eases, the PDH plant operating rate is expected to remain low in the short term [20]. 3.2.3 Direct Impact on PE Imports - China's PE imports are directly affected by the conflict. About 40% of PE imports come from the Middle East. It is estimated that the PE import volume will decrease by about 20 - 25 tons per month in March - April. Non - standard products' import reduction is expected to be more obvious, and attention should be paid to the HDPE - LLDPE price spread [22]. 3.2.4 Tightening of Asian Olefin Supply - The conflict has led to a shortage of crude oil and naphtha supply in Asia, causing overseas refineries to cut production. Ethylene and propylene prices have risen significantly. The export profit of polyolefins has increased, and export orders have increased, with some demand from Southeast Asia shifting to China [26]. 3.2.5 Negative Feedback on the Demand Side - As polyolefin prices rise, the demand side shows negative feedback. The downstream's willingness to accept high - price goods is limited, and the spot trading volume has decreased, with the basis weakening significantly. If the conflict persists, downstream enterprises will pass on cost pressure; if the situation eases, downstream replenishment will support prices [29][30]. 3.3 Valuation Feedback and Supply - Demand Outlook 3.3.1 Valuation Feedback - **PE Valuation**: The cost of PE has increased significantly due to the conflict. From March 2 to March 20, the comprehensive cost of PE rose 23.48%. The oil - based process profit decreased significantly, while the coal - based and ethane - based process profits improved. The current PE valuation is mainly supported by the strong crude oil price [47]. - **PP Valuation**: The cost of PP has also increased, with the comprehensive cost rising 31.61% from March 2 to March 20. The coal - based process profit expanded significantly, while the oil - based, PDH, and propylene - purchased process profits were compressed, providing strong support for the PP price [55]. - **Propylene Valuation**: The core valuation of propylene is based on PDH plants. Currently, the PDH plant profit is extremely compressed, and the support for propylene is strong. The PP - PL spread has narrowed to a historical low [67][68]. 3.3.2 Supply - Demand Outlook - **PE Supply - Demand**: Supply has decreased significantly due to plant shutdowns and import reduction. Exports have increased. Although the current inventory is at a neutral level, it is expected to show a de - stocking trend in Q2. The demand side shows negative feedback, but the impact on prices is limited due to supply tightening [70][71][72]. - **PP Supply - Demand**: Supply has decreased due to refinery production cuts, PDH plant issues, and poor profit of propylene - purchased PP. Imports may decrease, and exports have increased. The demand side shows some resilience, and the inventory is expected to remain low in Q2 [78][79]. - **Propylene Supply - Demand**: The PDH plant operating rate is expected to decline in April, reducing propylene supply. The demand for propylene has also decreased, but the supply reduction expectation still provides support [84][85].