Maintenance Concentration Leads to Cost Decline; April PP Market Experiences Volatile Performance

May 1st News

According to SpotCom data, the PP market in China fluctuated at high levels in April, with prices for various grades of products showing mixed increases and decreases. As of April 30, the benchmark price for PP fiber was 9,316.67 CNY/ton, representing a 4.18% increase from the beginning of the month.

Price Trend

Regarding raw materials:

As we enter April, the situation in the Middle East has been volatile, leading to a divergence and gradual easing of market sentiment regarding Middle Eastern crude oil production and transportation under the influence of geopolitical factors. Signals of a U.S.-Iran ceasefire have continued to emerge, causing international oil prices to shift rapidly from premium pricing toward a combination of expectations for de-escalation through negotiations and negative fundamentals. The Strait of Hormuz has seen intermittent resumption of shipping traffic, while the IEA has lowered its supply-and-demand forecasts, and API inventories have surged dramatically. The confluence of these multiple factors has triggered fluctuations in crude oil prices and loosened the cost support for PP’s far-term contracts. On the propylene front, plant maintenance activities by companies have been concentrated throughout the month, yet demand remains steady, driving spot prices to reach record highs before entering a period of consolidation. As for propane, although port arrivals remain low, overseas prices have been revised downward mid-month amid high global levels, while China’s spot prices have remained relatively firm. Overall, the price trends of PP’s various feedstocks have shown mixed movements, thereby weakening the support for PP costs.

Supply side:

In the April period, China's PP enterprises concentrated their maintenance plans, with the overall operating rate rapidly declining to a historically low level. After the maintenance plans of Yulong Petrochemical, Zhejiang Petrochemical, and seven other companies were successively implemented at the end of March, in April, additional companies such as Jingbo, Sinochem Quanzhou, and Dongguan Juzhengyuan joined the ranks of those undergoing maintenance. In the second half of the month, another eight companies, including Jineng Chemical, Yulong Petrochemical, and Sino-Saudi Tianjin, will also begin maintenance, although there are restarts planned for Zhenhai Line 2, Sino-Korea Petrochemical, and six other companies. As of the time of writing, the overall load of the industry in China is above 60%. The current inventory level is above 760,000 tons, and the arrival of imported materials is at a low level. Overall, the supply side provides relatively strong support for the spot price.

Demand aspect:

Affected by the sharp price surge in March, PP prices reached high levels by early April, and the overall trading atmosphere in the downstream market turned cautious. In the first half of the month, over-sold contracts and follow-up orders placed on the back of rising prices were largely fulfilled, after which transaction activity slowed down, and new position-building activities decreased. Buyers mostly adopted a just-in-time purchasing approach, with small, sporadic orders dominating the market. Among end-user SMEs, some that had reduced or halted production due to high cost pressures have seen limited resumption of operations, while larger and medium-sized enterprises continued to maintain stable procurement patterns. Overall, demand remained cautious, falling short of market expectations. Although some pre-holiday inventory-building consumption entered the market before the holiday period, the volume of such purchases was limited, providing only modest support for PP prices.

Future Market Forecast

In April, the PP market prices in China showed a high-level consolidation trend. From a fundamental perspective, April is the peak season for maintenance, with industry load reaching its lowest point, and port imports remaining at a low level. However, despite the large production capacity, the supply of goods can still meet demand. PP analysts believe that the current PP market is caught between bullish and bearish factors, with unclear guidance. The momentum for an upward trend appears insufficient, and it is likely to maintain a consolidation trend.

Technical Analysis

Analysts believe that according to SpotCom, on April 18th, the 10-day moving average of PP crossed below the 20-day moving average, with the difference fluctuating in the latter part of the month. Supporting indicators show that the PP price is at a recent high and a mid-term low at the 5th level, while also being at a warning position for a one-year overbought condition. It is judged that there is some resistance to the short-term spot price increase, and it is recommended to closely monitor international crude oil and Middle East shipping conditions for future market trends.