PP into the chemical sector led the rising varieties, estimated to save room

In the past one or two months, under the environment of crude oil prices plummeting and the overall weakening of chemical products, PP has performed very well, becoming the leading variety in the chemical sector. The main reason behind this is the downstream demand ’s resilience. The demand for medical supplies such as masks has increased significantly. Better supply and demand conditions prompt the rapid expansion of PP production profits, and this also brings the problem of high valuation.

The production profit of PP is calculated based on the weighted capacity of the five production processes. PP profit expansion is obviously divided into two stages: one stage is from mid-February to the end of March, during which the price of crude oil drops sharply, and the profit is transferred to downstream chemicals; the other One stage is after April, driven by the sharp rise in fiber materials, PP production profits hit a record high. However, the above two factors are not sustainable.

Crude oil prices have recently shown signs of bottoming out, and the expectation of long-term price recovery is strong; the hype of fiber materials has also ended. After May 1st, wire drawing and production returns to normal levels, which leads to room for PP valuation to repair downwards.

Demand gradually returned to normal

In the first half of April, the price of fiber materials rose sharply, and speculative demand caused the price of PP to rise sharply, destroying the normal supply and demand relationship. After the downstream profits were greatly compressed, the actual demand dropped significantly. As market sentiment returns to rationality, PP demand will basically return to normal by the end of April. From January to April, the average output rate of fiber materials is 17.95%, and the output of fiber materials is expected to be 1.35 million to 1.5 million tons. This output is far exceeding the actual demand. There are two reasons behind this: First, the exponential growth of mask output stimulates the demand for fiber materials. There are many orders and high profits. The acceptance of raw materials is high, and the demand for stocks is concentrated. The second problem is that upstream production companies actively adjust their production schedules in the event of rising fiber materials to achieve higher production profits. From the point of view of the output of fiber materials, it is enough to cover more than 100 billion masks.

At present, the overseas epidemic situation is gradually controlled, and the rapid growth of mask production will soon become a thing of the past. The average daily output of domestic masks is maintained at a reasonable level of 500 million to 700 million pieces, and the actual demand for PP pellets is boosted by 3.5% -4.6% , The degree of marginal influence gradually declined.

The marginal support of powder is weakened

From January to February, the supply and demand of pellets was unbalanced, and the profit fell sharply, thereby suppressing the price and profit of powder. From February to March, the amount of powder reduced by 90,000 tons year-on-year. The two-month reductions were due to the reduction of negative pressure on propylene raw materials in Shandong Land Refinery and the continuous loss of powder production. Judging from the situation at that time, the powder will continue to be squeezed out of the pellets, resulting in a reduction of 1.3 million tons throughout the year.
However, starting from April, some low-melting powders were changed to high-melting powders, and the production profit of powders has improved. In the short term, pellets cannot be extruded from powders, and there will be profit margins for powders in the future. The powder factor is changed from the originally expected bullish to bearish, which further weakens the reference significance of the powder as a marginal support.

Combined with the above analysis, it is expected that the September contract of PP futures may drop to 6,700 CNY/ton.