July 1st News
According to SpotCom data, the PP market in China was stable at first and then declined in June. The prices of all grades of products have significantly decreased. As of June 30, the benchmark price for PP fiber was reported at 7,566.67 CNY/ton, a 20.96% decrease from the beginning of the month.
Price Trend
Regarding raw materials:
In mid-June, positive signals emerged from high-level talks between the U.S. and Iran in the Middle East. Although it will still take time for shipping through the Strait of Hormuz to fully resume, the market now anticipates a gradual easing of tensions in the Middle East, leading to a rapid unwinding of geopolitical premiums. As a result, international crude oil prices broke downward, causing PP’s long-term cost structure to collapse. Propylene prices followed suit, declining in tandem, further exacerbated by the resumption of operations at enterprise facilities last month, which boosted supply in the market and put downward pressure on spot prices, triggering a sharp decline in prices during the second half of the month. Overall, the significant drop in PP raw material prices has had a negative impact on PP’s cost structure.
Supply side:
In June, some maintenance plans for PP enterprises in China were still implemented, leading to a further decrease in the overall operating rate. Although Maoming Petrochemical's Line 3 restarted at the beginning of the month, Yulong Petrochemical's Line 1, Fushun Petrochemical's old line, and the integrated project of Guangxi Petrochemical all experienced shutdowns. As of the time of writing, the overall load of the industry in China is around 65%, with weekly production below 680,000 tons. The current inventory level is around 580,000 tons, indicating an overall sufficient supply of goods, but there are more plans for facility restarts in the future. In summary, the supply side provides only moderate support to the spot price.
Demand side:
Currently, polypropylene consumption is at a low season level, and the downstream market in China shows persistent resistance to high prices. Additionally, as the market trend is downward, buyers prefer to buy when prices are rising rather than falling, leading to a generally cautious trading atmosphere. End-user enterprises are purchasing according to their needs, with little stockpiling activity, and most orders are small and sporadic. The operating rates of micro and small enterprises have seen limited improvement, while large and medium-sized enterprises continue to purchase steadily. Overall, the demand side is taking a wait-and-see attitude, providing poor support for PP.
Future Market Prediction
In June, the PP market prices in China were consolidated in the first half of the month and broke down in the second half. From a fundamental perspective, the cost side suffered a significant drop, while the industry's operating rate remained low, with limited changes in port arrivals. However, demand entered the off-season, making it difficult to see an increase in the short term. Under the supply-demand contradiction, the spot resources in the market appeared ample. PP analysts believe that currently, the PP market is characterized by weak supply and demand, with a collapse in cost values, insufficient upward momentum, and the trend may still be in a downward channel.
Technical Analysis
Analysts believe that according to SpotCom, in the first half of June, the 10-day moving average and the 20-day moving average for PP were intertwined, but in the second half of the month, the 10-day moving average fell below, and the difference between the averages expanded negatively. On the other hand, the auxiliary indicators show that the PP price is at a recent low in the 5th tier and at a medium-low level in the distant term. It is judged that there is a possibility of a short-term decline in the spot price, and it is recommended to closely monitor the international crude oil market and the shipping situation in the Middle East for future market trends.
