Both Supply and Demand Weak, PP to Trade Sideways in Early May

May 15 news

According to Spotcom data, in the first half of May, China's PP market experienced a decline followed by recovery, with the price change rate for various grades of products being relatively narrow. As of May 15, the benchmark price for PP fiber was reported at 9,556.67 CNY/ton, representing a 0.07% increase from the beginning of the month.

Price Trend

Regarding raw materials:

In early May, high-level officials from both the U.S. and Iran in the Middle East intensively released positive signals, suggesting that the long-term crude oil supply gap will gradually narrow. However, in the short term, market sentiment remains divided over the prospects of the Middle East conflict. After the holiday period, the international crude oil market experienced a sharp sell-off, with both WTI and Brent crude oil futures plunging sharply to two-week lows. This week, however, geopolitical premiums for crude oil have rebounded, leading to volatile trading in the first half of the month. On the propylene front, market demand for procurement has remained steady, though recently some enterprises have restarted their production units. Expectations of increased supply have partly reversed earlier price hikes, resulting in a pullback from recent highs. Overall, the polypropylene (PP) feedstock market has shown mixed trends, but support for PP costs remains relatively solid in the near term.

Supply side:

During the first half of May, China's PP enterprises saw a mix of capacity shutdowns and restarts, with the overall operating rate still at a historically low level. The list of restarts includes China-Anhui United, Guangdong Petrochemical's second and third lines, and Dagang Petrochemical. Shutdowns include Hongji Petrochemical, Sino-Saudi Tianjin, Yangzi Petrochemical, and five other companies. As of the time of writing, the overall industry load in China is around 50%, with weekly production falling below 680,000 tons. Current inventory levels are around 730,000 tons, and the overall supply is relatively tight. Overall, the supply side provides strong support for the spot price.

Demand aspect:

Affected by the speculative price increase at the end of the first quarter, the current PP price remains at a mid-term high. The downstream market in the industry continues to show resistance to high prices, and the overall trading atmosphere is cautious. Currently, buyers are purchasing according to their needs, and inventory building operations are modest, with mostly small, scattered orders being placed as needed. At the same time, due to high cost pressures, the operating rates of small and micro enterprises in China have seen limited improvement, while large and medium-sized enterprises continue to purchase in a stable manner. Overall, the demand side is taking a wait-and-see attitude, providing only moderate support to PP.

Future Market Forecast

In the first half of May, China's PP market prices fluctuated narrowly. From a fundamental perspective, maintenance in May remained concentrated, with industry load reaching a bottom, and port imports remaining low, leading to tighter spot market resources. However, expectations of weaker costs, coupled with sustained weak demand, led PP analysts to believe that the current PP market is characterized by weak supply and demand. The upward momentum is insufficient, and it is likely to maintain a consolidation trend.

Technical Analysis

Analysts believe that according to the SpotCom data, on May 1st, the 10-day moving average of PP crossed above the 20-day moving average, but the positive mean difference fluctuation narrowed in the first half of the month. At the same time, auxiliary indicators show that the 5 price levels of PP are all at high positions, and there is 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 the international crude oil and Middle East maritime shipping conditions for future market trends.