July 14th News
According to Spotcom data, in the first half of July, the PP market in China experienced a low-level rebound. The prices of various grades of products increased significantly. As of July 14, the benchmark price for PP fiber was reported at 9093.33 CNY/ton, representing a 14.53% increase from the beginning of the month.
Price Trend
Regarding raw materials:
Although positive signals from high-level talks between the U.S. and Iran in the Middle East have been frequent since mid-June, the situation has recently become volatile, impacting the ceasefire efforts. The risk of resuming shipping through the Strait of Hormuz has increased, sparking market concerns about the global crude oil supply and causing geopolitical premiums to rebound rapidly. As a result, international oil prices have risen, boosting the long-term cost outlook for PP; propylene prices have also risen in tandem, spurred by this development. Meanwhile, China’s supply has contracted due to production shutdowns at companies such as HSBC, and with the recent frequent opening of export windows, overseas sales are further absorbing Chinese supplies. Coupled with supportive factors within the domestic market, prices have strengthened significantly. Overall, the raw material market conditions are having a positive impact on PP’s cost structure.
Supply side:
In the first half of July, the overall operating rate of China's PP industry slightly increased from a low level. During this period, facilities at companies such as Dushanzi Petrochemical and Zhongjing Petrochemical returned to operation, with Dushanzi Tarim's new 450,000-ton capacity plant successfully completing trial production, leading to expectations of increased market supply. As of the time of writing, the overall load of the industry in China is above 66%, with weekly production rebounding to nearly 780,000 tons. Current inventory levels are around 540,000 tons, indicating an overall abundance of supply. In summary, the supply side provides moderate support for spot prices.
Demand side:
Currently, polypropylene consumption remains at off-season levels. Coupled with rising costs that are squeezing profit margins for downstream users, the downstream market continues to show strong resistance to higher prices. However, the simultaneous strengthening of cost benchmarks and futures basis has spurred intraday trading activity, triggering some new position-building orders. Overall, the trading atmosphere remains cautious, with most transactions involving small orders placed opportunistically at lower prices. For small and micro enterprises, the improvement in operating rates has been limited, while large and medium-sized enterprises continue to stabilize and digest existing inventories, resulting in an overall operating rate below 45%. On the demand side, the general trend remains weak, providing little support for PP prices.
Future Market Forecast
In the first half of July, China's PP market prices rebounded strongly. From a fundamental perspective, the cost side saw the return of geopolitical premium, with industry load slightly increasing from a low level, and limited changes in port arrivals of imported materials. The demand side continues to experience an off-season trend, making it difficult for significant growth in the short term. PP analysts believe that although there is a certain degree of supply-demand contradiction in the current PP market, it is rapidly rising driven by cost values.
Technical Analysis
Analysts believe that according to SpotCom, on July 10th, the 10-day moving average of PP crossed above the 20-day moving average, and the difference between them is expanding positively. On the other hand, auxiliary indicators show that the PP price is at a recent high in the 5-tier level and at a medium-high level in the distant term. It is judged that the upward momentum for the spot price in the short term may have already formed, and it is recommended to closely monitor the international crude oil market and maritime shipping conditions in the Middle East.
