Ample Supply, PP Prices in China Steady with a Slight Decline in August

September 1st, according to the news

According to the commodity market analysis system, the PP market in China experienced fluctuating consolidation in August, with prices for most grades of products slightly decreasing. As of September 1st, the mainstream offer price for drawing grade by Chinese producers and traders was around 7,180 CNY/ton, a change rate of -1.51% compared to the price level at the beginning of August.

Price Trend

Regarding raw materials:

In the first half of August, geopolitical tensions in Eastern Europe gradually eased, alleviating market concerns about unstable crude oil supplies. At the same time, OPEC+ signaled a clear intention to increase production, further reinforcing negative factors weighing on international oil prices. By the end of the month, propane prices followed crude oil downward, while cost support for PDH-based producers continued to weaken. Meanwhile, propylene supply initially tightened before easing later, leading to a modest price rebound that subsequently stalled. Coupled with lackluster downstream demand, this could weigh heavily on future market trends. Overall, raw material markets for PP are expected to provide only moderate cost support.

Supply side:

In August, the operating rate of China's PP enterprises remained largely stable with a slight increase. As of the time of writing, the overall load level of the Chinese industry has risen by 3% from early August to 80%, with the recent weekly total production approaching 810,000 tons. In the latter part of the month, the first line of Zhejiang Petrochemical and the first and second lines of Jingbo Polyolefins are scheduled to resume operations, coupled with the approaching commissioning of Ningbo Daxie's new 900,000-ton production line, indicating a clear trend of market supply easing, which severely limits the support from the supply side. Currently, the domestic supply remains abundant, with the inventory level slightly dropping below 770,000 tons, remaining relatively controllable. Overall, the support for spot prices from the PP supply side has not seen any improvement, and it may continue to put pressure on the market in the first half of September. The situation may ease when Zhenhai Petrochemical, Ningxia Baofeng, and Daqing Refining & Chemical undertake concentrated maintenance later.

On the demand side:

In August, polypropylene is in the transition period between the off-season and peak season. As the end of the month approaches, market participants in China are looking forward to and preparing for an increase in PP demand. However, the current trading atmosphere in the market remains sluggish. Merchants are slowly starting to stock up, but new orders are still mainly small and scattered, with a focus on contract deliveries. The improvement in cargo liquidity is limited. The operating rates of downstream enterprises have slightly increased, and there is a potential willingness to build inventory in sectors such as plastic weaving, construction, and agriculture. At the same time, macroeconomic factors, such as supply-side reform, provide guidance, and the market's bottoming-out strength is solid. It is recommended to closely monitor the dynamics of downstream operations.

Future Market Forecast

In August, the PP market prices in China fluctuated and showed a weak trend. From a fundamental perspective, the upstream raw material markets were relatively weak, collectively reducing support for PP. The industry load remained largely stable with a slight increase, and there is an expectation of short-term supply ease. Consumption is currently at the transition between the off-season and peak season. The market is currently awaiting an increase in consumption, with underlying seasonal speculative sentiment. Meanwhile, the global central bank meeting released strong macro expectations, and it is anticipated that the peak season for PP may start in the second half of September.