Maintenance Plan Increased; PP Prices Stabilize by End of December

January 1st News

According to the commodity market analysis system, at the end of December, the PP prices in China were relatively low, with the market stabilizing and prices of various grades showing a slight recovery. As of December 31st, the benchmark price for PP fiber was reported at 6,170.00 CNY/ton, representing a year-on-year change rate of -3.04%.

Price Trend

Regarding raw materials:

The latest round of production increase plans by OPEC+ has sparked industry concerns about an oversupply of crude oil. Recently, due to holiday-induced demand lags, oil prices have shifted downward and are now experiencing volatile fluctuations. As for propylene, prices reached a temporary peak in mid-month, but the positive factors are gradually being exhausted. Coupled with the resumption of supply capacity, spot prices are currently showing signs of declining from their low levels. On the propane front, prices continue to be supported by high overseas market prices, keeping port prices at elevated levels and maintaining overall firmness. Overall, the price trends of PP’s various raw materials have been mixed, providing only moderate support for PP costs.

Supply side:

At the end of December, the restarts and maintenance of PP enterprises in China were roughly balanced, with a slight increase in the overall operating rate. As of the time of writing, the overall load level of the industry in China is around 77%, with little difference from mid-month. The current weekly total production is above 790,000 tons, and the inventory level is around 790,000 tons, with the supply within the market still remaining ample. However, multiple maintenance plans have been announced for January, leading to an expectation of decreased production. Overall, the support from the supply side for the spot price has remained stable.

Demand side:

At the end of the year, China's economic work conferences and other meetings released neutral information, which did not meet market expectations and did not significantly boost business sentiment. E-commerce has had some positive impact on the consumption of packaging and household appliances, but it has limited overall improvement in the trading atmosphere of the industry market. At the same time, the effects of the Federal Reserve's interest rate cut are still ongoing, dragging down the export of end products, with downstream enterprises operating at suboptimal capacity. Currently, the finished goods market for PP end-users is lukewarm, with slow raw material digestion. The need for capital recovery at the end of the year restricts the willingness of end-user enterprises to build inventory, leading to increased discounting and destocking operations by midstream businesses. Demand momentum is insufficient to support the spot price of PP.

Future Market Forecast

At the end of December, China’s PP market prices reached a temporary low, and the market trend stabilized after hitting bottom. From a fundamental perspective, upstream raw material prices showed mixed movements, providing only moderate support for PP. Industry utilization rates remained at high levels with slight adjustments, while consumer demand saw limited improvement. Given the large existing production capacity, the supply situation remains loose. However, due to the concentrated destocking efforts by petrochemical companies earlier on, some buyers took advantage of lower prices to enter the market. It is expected that the PP market may soon enter a period of adjustment.