According to the Commodity Market Analysis System of Shengyi Society, the domestic PP market had a “good start” in late March, with prices rising strongly. As of March 23, the benchmark price for PP wire drawing in Shengyi Society was reported at 9360 yuan/ton, a significant increase of 7.05% compared to the previous trading day, with a year-on-year increase of up to 40.96%. The market shows a typical cost driven upward trend.
price trend
Cost side: The raw material market is strengthening across the board, with strong support
After the Middle East crude oil was affected by transportation disruptions and the cancellation of long-term contracts in early March, the situation has not eased recently, and some countries have significantly reduced their crude oil production due to force majeure. Combined with the firm stance of OPEC+production cuts, international oil prices have risen at a high level recently. The uncertainty and medium-term nature of the current US Iran situation continue to raise concerns among industry players, leading to a strong trend in PP’s remote cost value. In terms of propylene, it has followed the upstream trend, coupled with the concentrated landing of enterprise equipment maintenance, some equipment has reduced load operation, and the effective supply in the market has significantly decreased, highlighting the tight pattern of spot resources. At the same time, the arrival of propane at ports has decreased synchronously, and domestic and foreign commodity prices remain high, with a high focus on spot prices. Overall, the prices of PP raw materials are positive, providing strong support for PP costs.
Supply side: Maintenance peak approaching, supply pressure easing
Entering late March, the maintenance plans of domestic PP enterprises are relatively concentrated, and the overall operating rate is not high. As of the time of writing, the overall load level of the domestic industry has dropped to around 70%. In the early stage, there were multiple sets of equipment maintenance in enterprises such as Zhejiang Petrochemical and Maoming Petrochemical. Last week, some companies also implemented maintenance plans one after another. The total production capacity of industry maintenance is at a historical high, with an average weekly output of less than 730000 tons. The inventory level has dropped to 860000 tons, and the arrival of imported materials at ports has also significantly decreased. Overall, the supply side’s support for spot prices is still acceptable.
Demand side: High prices suppress chasing after gains, cautious follow-up on transactions
Affected by high spot prices, the overall trading atmosphere in the downstream market of the industry has been cautious since the beginning of the month. In the early stage, some refineries oversold contracts and chase orders were basically delivered, but the current transaction pace has slowed down and warehouse building operations have decreased. Buyers often use and take as you go, with scattered small orders being the main focus. Some terminal small and micro enterprises have reduced production and stopped production due to high cost pressures, while large and medium-sized enterprises have stabilized their inventory. The overall demand side is in a wait-and-see situation, with performance falling short of market expectations and average support for PP.
Future forecast
The current PP market is in a game pattern of “strong cost, strong supply contraction, and weak demand”. The supply side has tightened due to high maintenance levels, but with a large production capacity base, inventory can still ensure basic market supply.
Overall, PP analysts from Shengyi Society believe that in the short term, the core driving force of the PP market will still be cost logic, and spot prices may remain in a high range of fluctuations. It is recommended to closely monitor the fluctuations in the crude oil market and the follow-up of downstream demand, and be alert to the further suppression of demand by high prices.
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