Cost-side Repeated Fluctuations & High-Level Maintenance—PP Market to Experience Volatile Performance in Early April

April 9th News

According to the commodity market analysis system, in early April, the PP market in China experienced high volatility, with prices for various grades rising and falling. As of the publication date on April 9, the benchmark price for PP fiber was 9416.67 CNY/ton, an increase of 2.73% from the beginning of the month.

Price Trend

Regarding raw materials:

In March, affected by geopolitical factors, both crude oil production and transportation in the Middle East were hit by force majeure events. Coupled with OPEC+’s firm stance on production cuts, international oil prices were pushed higher. Currently, despite repeated calls for a ceasefire between the U.S. and Iran, uncertainty in the region remains unabated, continuing to fuel industry concerns and causing PP’s long-term cost levels to fluctuate at high levels. On the propylene front, companies have recently completed concentrated plant maintenance, while demand has remained steady, leading to a reduction in effective supply and sustained strong market absorption, thus driving prices higher. As for propane, although recent arrivals at ports have declined, overseas spot prices have softened amid high global price levels, easing the center of gravity for China’s spot prices. Overall, the prices of PP’s various raw materials have shown mixed trends, resulting in volatile support for PP costs at elevated levels.

Supply side:

Entering April, maintenance plans for Chinese PP enterprises are concentrated, and the overall operating rate has rapidly declined. As of the time of writing, the overall industry load level in China is around 71%. At the end of March, maintenance plans for companies such as Yulong Petrochemical and Zhejiang Petrochemical were successively implemented. Recently, additional companies including Jinbo, Sinochem Quanzhou, and Dongguan JuZhengYuan have also joined the ranks of those undergoing maintenance shutdowns. The total loss of production capacity in the industry is at a historical high, with the current weekly total output less than 690,000 tons, and inventory levels have dropped below 700,000 tons. Additionally, the arrival of imported materials has significantly decreased. Overall, the supply side provides strong support for spot prices.

Demand side:

Due to the high spot prices, the overall trading atmosphere in the downstream market of the industry has been cautious recently. The over-sold contracts and follow-up orders from refineries in March have been basically delivered, and the current transaction pace has slowed down, with fewer position-building operations. Buyers are mostly taking goods as needed, mainly in small and scattered orders. Some small and micro enterprises at the terminal end have reduced or suspended production due to high cost pressures, while large and medium-sized enterprises have stabilized their procurement. Overall, the demand side is in a wait-and-see attitude, performing below market expectations, providing only moderate support for PP.

Future Market Forecast

As we enter early April, China’s PP market prices have been experiencing high-level fluctuations. From a fundamental perspective, industry utilization rates remain at historically low levels, and imports arriving at ports have declined. Inventory levels are continuing to decline as well; however, given the large production capacity base, supply remains sufficient to meet demand. Currently, the combined support from upstream raw materials for PP costs has become volatile but still remains at relatively high levels. Therefore, PP analysts believe that the current market trend is primarily driven by both cost and supply factors. Nevertheless, the pressure from high costs continues to dampen demand among smaller producers. Demand growth has fallen short of expectations, making it difficult to further reduce inventory levels. As a result, the transmission of price signals has been hindered, thereby weakening upward momentum in the market going forward. We recommend closely monitoring fluctuations in crude oil prices.