What is driving the recent surge in China's polyethylene prices?

What is driving the recent surge in China's polyethylene prices?
China's PE market has seen a dramatic price swing. After a bearish 2025 where prices trended down, a geopolitical event in early 2026 triggered a violent rally from 6,800 yuan/ton to 9,700 yuan/ton. This spike is largely cost-push: with the Strait of Hormuz blocked, WTI crude hit $105, pushing naphtha-based ethylene production costs to 8,000-10,000 yuan/ton. In contrast, coal-based routes have a full cost of only 5,500-6,000 yuan/ton, creating a 2,500-3,000 yuan advantage. By May, East China spot PE reached 8,450-8,600 yuan/ton, up 37% from Q1 settlement prices. This price surge has dramatically improved margins for coal-to-olefins producers like Baofeng Energy, whose Q1 profit rebounded 52% quarter-on-quarter.