Supply Contraction Keeps Raw Materials Firm; PP Market Prices Remain High and Continue to Rise

March 17 news

According to the commodity market analysis system, in mid-March, the PP market in China showed an upward trend, with prices of various grades fluctuating and increasing. As of March 17th, the benchmark price for PP fiber was reported at 8943.33 CNY/ton, representing a year-over-year change rate of +34.22%.

Price Trend

Regarding raw materials:

International oil prices continue to rise due to transportation disruptions and contract cancellations. The ongoing uncertainty in the U.S.-Iran situation has raised concerns among industry players, providing strong support for the upstream end of PP. In terms of propylene, after following the upstream price increases, there has been a consolidation. Additionally, with concentrated plant maintenance in China, some facilities are operating at reduced capacity, leading to a significant decrease in effective supply. The tightness of spot resources is becoming more evident. At the same time, the arrival of propane at ports has also decreased, with prices remaining high, and the overall spot price level remains unchanged. Overall, the market conditions for PP raw materials are positive, providing strong cost support for PP.

Supply side:

Since March, maintenance of PP enterprises in China has been slightly higher than restarts, leading to a general reduction in operating rates. As of the time of writing, the overall industry load level in China has decreased by 4% to around 70%. Enterprises such as Zhejiang Petrochemical and Maoming Petrochemical have implemented maintenance plans. The current weekly total production is around 720,000 tons, with inventory levels close to 940,000 tons, indicating a generally ample supply within the market. Overall, the supply side provides moderate support for spot prices.

Demand side:

Due to the high spot prices, the overall trading sentiment in the downstream market of the industry in mid-March was mostly cautious. The orders that chased higher prices in the early part of the month have largely been released, and the establishment of new positions has decreased. Currently, the market is inclined towards purchasing as needed, with orders mainly consisting of over-sold contracts fulfilled by refineries and scattered small orders. Some small and micro enterprises at the terminal end have reduced or halted production due to high cost pressures, and buyers have returned to a more rational stance. Demand for PP is generally stable.

Future Market Forecast

In mid-March, the prices of PP in China increased. From a fundamental perspective, the industry's operating rate has been slightly reduced, and the arrivals of imported materials at the ports have decreased. However, with a large base of production capacity, inventories are currently at high levels. At the same time, the pressure of high costs is suppressing demand from some smaller factories, but the overall cost support for PP from upstream raw materials remains strong. Therefore, the current PP market trend will likely continue to be primarily guided by cost factors, and it is recommended to closely monitor the fluctuations in crude oil prices.