Polypropylene market outlook is hovering high and wide

It will take time for the new equipment to continue and stably put into production. In addition, the downstream consumption field is huge and the demand base is huge, and the polypropylene market is still supported. Although the willingness to receive downstream goods has weakened recently and the inventory has accumulated, the room for price downward is limited and it is expected to rely on The key technology is wide oscillation.

　　 Since mid-November, 2101, the main polypropylene contract, has broken through technical suppression and has risen rapidly. This is mainly due to the low proportion of wire drawing scheduling and tight structural supply. At the same time, downstream demand is strong, and petrochemical depots are smooth. However, as prices reached high levels, downstream willingness to receive goods began to weaken.

　　The short-term impact of increasing supply is limited

In terms of new capacity, Yantai Wanhua and Yantai China Coal Yulin Phase II with a total production capacity of 700,000 tons/year were put into operation in December. At present, Yantai Wanhua’s facilities are operating smoothly, extending the intermittent shutdown of China Coal Yulin Phase II and adding new capacity in the short term. The impact on the market is limited, and sustained and stable capacity release should be in the first quarter of 2021, and far-month contracts are under pressure.

In terms of equipment maintenance, the installations of Zhongsha Tianjin and Ningbo Formosa Plastics were shut down due to failures. The start-up time of the Zhejiang Petrochemical and Yanchang Zhongmei installations is to be determined. The installations of Wuhan Petrochemical, Sino-Korea Petrochemical and Donghua Energy started in mid-to-late December and are currently undergoing overall maintenance. The loss is less than 200,000 tons/year.

　　 In terms of petrochemical production scheduling, affected by the epidemic, the polypropylene supply structure has changed. According to preliminary statistics, from January to November, the total output of PP increased by 3 million tons compared with the same period last year, of which the fiber material increased by 1.7 million tons, accounting for 56.7% of the total. The growth of fiber materials squeezed the share of other types of PP. The output of BOPP special film materials fell sharply, and the output of drawing materials only achieved a slight increase of 2%. In the autumn and winter, foreign epidemics have repeated, and the demand for epidemic prevention materials has increased sharply, which has led to an increase in the proportion of fiber material scheduling, which intensified the shortage of drawing materials and caused structural supply shortages. It wasn't until late November that the drawing material scheduling ratio gradually returned to a normal level, but in recent days, the scheduling ratio has dropped.

　　 Downstream procurement slows down but rigid demand is still

　　 The cumulative increase of polypropylene 2101 contract from early November to the highest point of the month reached 1,200 CNY/ton, which was 800 CNY/ton higher than the increase in the same period last year. Excessive growth has put pressure on downstream costs, especially in the plastic weaving industry, where production profits have shrunk and the willingness to purchase raw materials has decreased. With the fall in prices, under the mentality of buying up and not buying down, purchasing is still cautious and purchase more on demand. The pre-orders of the BOPP industry are booming. Recently, new orders have decreased, and the factory's willingness to purchase raw materials has fallen. However, we must also see that demand has been strong since this year, and the downstream thin-wall, injection molding, and modified materials markets of polypropylene have shown strong demand. The BOPP industry has shown a prosperous scene this year as the supply of raw materials has decreased and demand has picked up significantly. The national "double cycle" strategy promotes the upgrading of the industrial chain. Under the influence of new infrastructure, poverty alleviation, e-commerce, 5G construction, and the stall economy, the plastic products industry presents a diversified demand growth pattern. At the same time, the outbreak of the epidemic has had a profound impact on the consumption structure, not only greatly stimulating the production of raw materials related to epidemic prevention products, but also spawning an increase in demand brought about by changes in lifestyles. For example, since the beginning of this year, foreign demand for garden-related products has grown rapidly, and the growth of refrigerators and small household appliances is also related to this.

　　 In addition, due to the undervaluation of the RMB exchange rate and insufficient foreign labor, the export orders for plastic products have increased. On the whole, the downstream consumption of polypropylene is complex, with a huge demand base and strong rigid support.

　　The crude oil market shows a state of undersupply

　　 OPEC+ reached a consensus on the next phase of production reduction agreement, reducing the scale of production reduction by 7.7 million barrels/day by 500,000 barrels/day. According to EIA's calculations, since June, the global oil market has shown a pattern of less than demand for five consecutive months. Although OPEC+ will reduce the scale of production cuts from January next year, the supply gap will not disappear. The shortage of supply will inevitably make inventories continue to be digested, and oil prices will therefore be supported, thereby boosting polypropylene prices from the cost side.

　　 To sum up, it will take some time for the negative fermentation to steadily increase on the supply side, and there is a strong rigid support on the demand side. Although the petrochemical inventory has accumulated recently, it has not caused a further increase in the contradiction between supply and demand. Therefore, the downward adjustment of polypropylene prices is limited, and it is expected to rely on key technical positions to form a phased high oscillation market.