China PP Market to Witness Oversupply in May
Entering Q2, 2023, both China’s PP supply and demand waned. Although the supply decline gave strong support to the PP market, China’s PP prices fluctuated downward, as the overall PP demand remained sluggish. Will the PP price rebound in the late period of Q2, 2023 amid an expectation of supply-demand pattern variation?
According to SCI’s data, China’s PP prices fluctuated downward and hovered at lows in Q2, 2023, mainly curbed by the lackluster demand. There will probably be notable changes in PP supply and demand in the rest of Q2, 2023, which is worth focusing on.
China’s PP prices remained low.
China’s PP prices fluctuated downward in Q2, 2023, and the mainstream PP prices further dropped. Therein, China’s PP prices slightly rebounded at first and then fluctuated downward in April. Entering May, against the backdrop of tepid demand, China’s PP prices further went down after the Labor Day holiday. Taking the PP raffia price in East China as an example, PP raffia prices in East China declined from RMB 7,680-7,830/mt in early April to RMB 7,350-7,450/mt on May 8, down RMB 330-380/mt. Overall, the sluggish demand was the key factor dragging down PP prices.
China’s PP supply shrank, supporting the PP market.
PP supply decline gave strong support to the PP market, underpinning the PP prices somewhat. Although the relatively intensive PP capacity expansion notably hit China’s PP market this year, the supply pressure was alleviated somewhat in April, as there was no newly added PP unit startup.
As for the unit maintenance, PP units took overhauls intensively from April to May. Under the cost and supply pressure, many PP producers shut units down for maintenance or cut unit operating rates. According to SCI’s data, operating rates of PP units averaged 78.62% in April, down 5.13% M-O-M and down 2.97% Y-O-Y. Given the intensive unit maintenance and no fresh capacity in April, the overall supply pressure on China’s PP market alleviated somewhat in Q2, 2023, supporting China’s PP market.
PP inventory saw minor fluctuations, giving thin support to the PP market.
China’s PP inventory at major producers hovered at a medium-to-low level, lending limited support to the PP market. According to SCI’s data, the PP inventory at major producers hovered at 630-890kt in Q2, 2023. Many PP units took overhauls, so the overall PP supply was curtailed, alleviating the inventory pressure on PP producers. The overall PP inventory at producers was relatively rational after the Labor Day holiday, supporting the PP market. Moreover, the decline in PP inventory was limited in the wake of tepid demand. Especially after the Labor Day holiday, the PP inventory at major producers gave minor support to the PP market.
Units will probably take overhauls intensively in May. Although the demand for PP may remain sluggish, intensive unit maintenance will probably alleviate the inventory pressure on PP producers. Besides, market participants are recommended to pay attention to the new unit startup.
PP demand underperformed, impairing the PP market.
China’s PP mainstream prices moved downward, mainly as the demand for PP remained tepid. April is the traditional demand peak season for China’s PP market. However, the export orders shrank dramatically in April 2023, and operating rates at China’s PP downstream enterprises saw notable declines, hindering the demand for PP.
According to SCI’s data, the operating rate of the major downstream industry of PP in April 2023 witnessed M-O-M and Y-O-Y declines. The downstream newly added orders were insufficient, so PP producers cut selling prices to promote sales. Moreover, most downstream users cut unit operating rates under inventory pressure. Accordingly, the overall PP demand performed poorly, hindering the PP price increments.
There will probably be changes in supply-demand pattern amid unit maintenance and capacity expansion.
It is predicted that China’s PP market will witness an oversupply in May. As for the PP supply, PP units will probably take overhauls intensively in May, and the 200kt/a PP unit line 2 at Shandong Chambroad Petrochemicals, the 400kt/a PP unit at Oriental Energy (Maoming) and the 600kt/a PP unit at Grand Resource Phase II may come on stream in May. Accordingly, the overall PP supply is likely to rise. In terms of the PP demand, it is estimated that China’s PP demand will see minor improvements in May. Overall, China’s PP prices will probably decline further in May with sluggish demand and severer supply pressure.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
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