Cost-side positives slow down; PP fluctuates within a range in mid-January

January 20th, News

According to the commodity market analysis system, in mid-January, China's PP prices increased and then retreated, with various grades of products showing mixed price movements. As of January 20th, the benchmark price for PP fiber was reported at 6523.33 CNY/ton, representing a year-over-year change rate of +4.32%.

Price Trend

Regarding raw materials:

The impact of earlier U.S. actions on international crude oil prices has gradually weakened. Coupled with the easing of tensions in the Middle East, oil prices have fallen from their highs, leading to a waning upward support for upstream PP contracts further down the curve. On the propylene side, rising prices are primarily driven by tightening supply and warming demand. The shutdown of two PDH units in Qingdao and Yantai has exacerbated supply constraints. In the near term, prices may need to consolidate at higher levels; however, in the medium term, buoyed by cost support, pre-holiday stockpiling, and anticipated supply maintenance, there still remains some room for modest price increases. As for propane, overseas market prices remain firm at high levels, and strong import prices into China continue to provide support, keeping the overall industry focus unchanged. Overall, the prices of various PP feedstocks have shown mixed trends, with cost support for PP remaining relatively strong but showing signs of slowing down.

Supply side:

In mid-January, 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 industry load level in China is around 75.5%, with a negligible difference from the early part of the month. The current weekly average total production is over 780,000 tons, with inventory levels approaching 700,000 tons, showing some digestion, and the supply within the market remains ample. Overall, the supply side provides moderate support to the spot price.

Demand side:

The overall trading atmosphere in the downstream market of the industry has improved. Buyers are chasing higher prices and releasing orders, with a stronger willingness to stock up, and refineries are overselling. At the same time, the phased commissioning vacuum in the later market is stabilizing the mentality of operators, and the demand side is providing stronger support for PP. However, some end-user companies are gradually arranging holidays, and production schedules may decline in the future. This could be followed by year-end capital recovery constraints on demand.

Future Market Forecast

In mid-January, the PP market prices in China stabilized after a rise. From a fundamental perspective, the strong support from the cost side provided by various upstream raw materials for PP began to ease. The industry's operating rate was slightly adjusted, and there was some improvement in consumption. With pre-holiday inventory buildup likely to weaken gradually, and with a large base of production capacity leading to rapid inventory accumulation, it is expected that the PP market may enter an adjustment phase after a period of stagnation.