PP Average Price Likely to Present a Brief Uptick in 2024
China’s PP prices showed an M-shaped trend from January to October 2023, mainly affected by macro environment, feedstock costs and supply-demand patterns.
PP price trends can be divided into four stages. First, PP prices reached the highest level in the first half of this year in January, notching RMB 8,025/mt, because the futures prices increased 8 times consecutively on the bullish expectation for demand resurge after related control policies were optimized, and local producers raised EXW offers for PP with slowed-down of inventory accumulation during the Spring Festival holiday. Second, PP prices lost ground from February to early June because of less-than-expected demand and depreciated crude oil values amid banking crisis in the Europe and U.S., even though intensive maintenance eased the supply pressure in May. Downstream processors whittled down operating rates successively given limited profits and orders, as well as finished product inventory accumulation.
Third, PP prices ramped up from July to mid-September on the back of rebounds in crude oil values and downstream demand amid peak season, but the downstream demand was still softer than that in the same period of last year, so deals softened gradually. As a result, PP prices began to pull back in late September. In October, sluggish demand and a dip in feedstock costs continued to weigh down the PP price. Generally, the highest price was RMB 8,030/mt in late September, while the lowest one was RMB 7,035/mt in early June.
SCI estimates that China’s PP market prices will probably fluctuate downwards in Q4, 2023, mainly affected by the change in supply-demand fundamentals. China’s PP capacity is expected to expand in Q4. Meanwhile, previously added units will probably run steadily, and unit maintenance is likely to decrease, so PP supply may grow gradually in Q4. But as for the demand, it may weaken with the industry entering the demand slack season, which may aggravate the supply-demand imbalance. Hence, PP market prices will probably lose ground in Q4.
SCI predicts that China’s PP prices will probably drop at first but then rally in Q1, 2024. PP prices are likely to see a brief dip in January. On the supply side, China’s PP capacity will continue to grow. On the demand side, some players may stockpile before the Spring Festival holiday, so PP producers may not curtail offers obviously. Thus, PP prices may decrease, but the downwards range will be narrow. But in February, the price decline may be enlarged, as downstream enterprises will likely resume production late. For instance, plastic woven and BOPP film may restart units late, unless they receive order early. Generally, the overall downstream demand for PP will be restricted. After drops in February, PP prices will probably rally in March with the demand peak season approaching.
China’s PP prices are estimated to hover at RMB 7,200-8,030/mt in 2024, and mainstream prices may increase a little. There may be large uncertainties from the macroeconomic environment. In terms of fundamentals, PP supply and demand will probably both level up next year, but the growth rate of demand may be lower than that of supply. However, the demand improvement and less-than-expected supply pressure in expected overhaul year of 2024 are expected to underpin PP prices marginally. The highest price may occur in Q2 or Q3, 2024, backed by extensive unit maintenance, limited fresh capacity and expected demand improvement, especially in Q3, 2024 when the demand peak season is coming. The lowest price may emerge in Q1 or Q4, 2024, mainly as the industry may be under the demand slack season, and PP supply pressure will probably stay high with abundant capacity release in Q4, 2024.
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