Costs Rise, January PP Follows Upstream Prices

February 2nd, according to news,

According to the commodity market analysis system, the PP market in China gradually increased in January, with significant price increases for all grades of products. As of January 31, the benchmark price for PP fiber was reported at 6720 CNY/ton, with a year-over-year change rate of +8.91%.

Price Trend

Regarding raw materials:

At the beginning of the month, U.S. actions spurred a significant rise in international crude oil prices, fueling a strong speculative rally in the market. Meanwhile, as the risk premium narrowed, expectations of reduced production in Iran’s oil export-related industrial chain—due to sanctions—pushed oil prices higher once again, providing robust upward support for the distant-end upstream segment of PP. As for propylene, in addition to following the upward trend in feedstock prices, tighter supply and warming demand have been the primary drivers of its price increase. The shutdown of two PDH units in Qingdao and Yantai has further exacerbated supply tightness. In the short term, prices may need to consolidate at their current high levels; however, in the medium term, buoyed by cost support, pre-holiday inventory buildup, and anticipated supply maintenance, there still remains room for further price hikes. On the propane front, overseas prices remain firm at elevated levels, and high import prices into China are providing additional support, keeping the overall industry focus unchanged. Overall, the positive outlook for PP feedstock prices provides strong cost support for PP.

Supply side:

In January, PP enterprises in China saw a roughly balanced level of restarts and maintenance, with overall operating rates showing limited changes. As of the time of writing, the overall industry load level in China is around 75.5%, with little difference from the beginning of the month. The current weekly average total production is over 780,000 tons, and the inventory level is close to 700,000 tons, with some digestion. The supply within the market remains ample. Overall, the supply side provides moderate support for the spot price.

Demand side:

The overall trading atmosphere in the downstream market of the industry has improved. Buyers are chasing rising orders, and their willingness to stock up has increased, with refineries selling more than their production. At the same time, the phased commissioning vacuum in the future will stabilize the mentality of operators, and the demand side's support for PP will strengthen. However, as the Lunar New Year approaches, some end-user companies are beginning to gradually arrange holidays, and production schedules may decline. This could be followed by year-end capital recovery constraints on demand.

Future Market Forecast

In January, the PP market prices in China gradually increased. From a fundamental perspective, the overall raw materials upstream provided strong support to the PP cost end. The industry load was slightly adjusted, and there was a slight improvement in consumption. However, pre-holiday inventory buildup may gradually weaken, and with a large base of production capacity, inventory accumulation is rapid. Therefore, it is expected that the upward trend of PP may face some obstacles.