Will Increased Demand for Medical Masks Affect PP Market Notably

In the past fewdays, the novel coronavirus infection in Wuhan has continued to attractattention. As the Spring Festival holiday coincides, the development of theepidemic affects the stances of the people throughout the country. “Wearing amask and reducing travel” is a must, but as market participants, we are alsoconcerned about the increased demand for masks, and how much will it affect thePP (polypropylene) market? During the fight against the novel coronavirus, the number ofoutdoor activities during the Spring Festival holiday decreased, andconsumption fell sharply. What should we do? This article explores together.

Increased demandfor masks, increased demand for PP fiber

Due to the human-to-human transmission of novel coronavirus, the demand formasks has increased dramatically. It is understood that masks on relatedpharmaceutical platforms and e-commerce platforms are selling well and even outof stock in multiple channels. According to Internet news, there are even mask producersrecalling employees during the Spring Festival holiday to work overtime toensure the supply of masks.

At present, there are many types of masks on the market,including ordinary masks such as paper masks, cotton masks, pitta masks, andmedical masks such as surgical masks and protective masks (N95 respirator).Compared with ordinary masks, medical masks have a strong barrier againstbacteria. For example, according to Internet data, medical protective masks(N95 respirator) can block 95% of bacteria, medical surgical masks can block70% of bacteria, while ordinary masks can only block 36% of bacteria. It isprecisely because of this that in this novel coronavirus prevention, medical surgical masks and protectivemasks (N95 respirator) have become the focus of demand, and related salesplatforms and offline outlets have been out of stock.

In recent years,the growth of fiber with high melt index output has been considerable.

Generally speaking, the PP materials used formedical and health materials are mainly PP fiber materials with high melt index.Market participants are concerned. Will the PP fiber producers guarantee thesupply in the face of a large increase in demand for masks across the country?We can learn from the domestic supply of high-melt index fiber.

We mentioned that the PP materials used for medical andhealth materials are mainly PP fiber materials with high melt index.

In recent years, withthe release of medical policies and the second child dividend, the demand for PPfiber materials with high melt index has also been fairish. PP producersactively research and develop the PP fiber market. According to SCI’sstatistics, the domestic output of PP fiber materials in 2019 was about 1.7million mt, an increase of 7.5% compared to 2018. Among them, that of PP fibermaterials with high melt index (about 35oC) was 950kt, an increaseof 15.8% year-on-year; that of PP fiber materials with medium melt index (about25oC), remaining stable from 2018. From the perspective of the typesof enterprises, the output of PP fiber materials with high melt index at Sinopecaccounted for 26%, and that at PetroChina accounted for 37%. Although that atcoal chemical enterprises and local enterprises took a small proportion, itincreased obviously.

Based on the detailed data, it is seen thatDalian Organic Chemical, PetroChina Dushanzi Petrochemical, Sinopec LuoyangCompany, Sinopec Jinan Refinery Company, Sinopec Zhenhai Refining and Chemicaland Oriental Energy were main fiber producers.

During the battle against novel coronavirus, we also sawthe mission of fiber material producers, and they issued a slogan to fullyprotect the supply of medical supplies. According to SCI, Oriental Energy andShanghai SECCO Petrochemical have already adjusted their internal productionplans. They will increase output in February to meet the market demand. Inaddition, SCI learnt that Dalian Organic Chemical, which has an annual outputof over 150kt of fiber materials with high melt index, has double-lined fiberproduction since January 6 and is still in mass production now. PetroChinaDushanzi Petrochemical also said that it would stand by and adjust itsproduction plan at any time. Therefore, under the situation that the fiber withhigh melt index producers fully guarantee the supply, it is expected that theshort-term supply of PP fiber with high melt index will increase significantly.

Through analysis, SCI found that the currentdomestic supply of fiber with high melt index is relatively optimistic.Besides, in the face of this novel coronavirus prevention, related producersare also actively responding to safeguard the supply of raw materials. But whatis the proportion of PP fiber for masks in the total PP fiber applications? With this question in mind, SCI combed the application structure of the fibermaterial.

The application of PP fiber with high meltindex is wide, so the increase in the amount of masks exerts a small effect onPP market.

The downstreamapplication fields of PP fiber materials are very wide, of which non-wovenfabrics (non-manufactured fabrics) account for 70%. The application ofnon-woven fabrics is divided into two parts: packaging materials (forpackaging) and health materials (medical and sanitary products). High-meltindex fibers are mainly used in the field of health materials. However, thereare many products in the field of health materials, not only including masks,but also diapers, sanitary napkins, medical bandages, interlinings, etc.According to China Textile Net data, China’s various mask output in 2018 was4.54 billion pieces. According to market data, 1 mt of high-melt index PP fibermaterials can produce nearly 250,000 pieces of PP medical protective masks. Thevolume is only about 20kt per year, which accounts for less than 3% of thesupply of high-melt index fiber materials. Even if there is a large demand formasks this time, the impact on the PP market is supposed to be within a moderaterange.

As marketparticipants, we are still sensitive to changes. If the output of PP fiber withhigh melt index increases, will the output of other materials be affected?

As we analyzed earlier, first, the volume offiber material used for masks is relatively small. Even if the demand for masksincreases greatly, the impetus for leveraging PP fiber producers to adjusttheir supply patterns is limited. Secondly, PP fiber with high melt indexproducers are relatively concentrated, and new entrants have not realized massproduction. Meanwhile, early channels are limited. From the perspective ofmaintaining customers and the market, PP producers must also maintain abalanced supply of products. Therefore, SCI holds that some key transparent producersmay increase the production of high-melt fiber materials. However, producerssuch as Dalian Organic Chemical, Sinopec Jinan Refinery Company and OrientalEnergy mainly produce fiber materials, thus, even if the production of other PPmaterials are scheduled to reduce, the impact on the overall PP market islimited.

We believe that it is necessary to payattention to the impact of the development of novel coronavirus on thefollow-up market, but we must also note that the intensity and scope of theprevention and control of this novel coronavirus are significantly greater than those during the SARS (Severe AcuteRespiratory Syndromes) period. Therefore, this novel coronavirus has a smallereffect on the PP market than expectation, and SCI believes that in the shortterm, the commodity market is more affected by the market sentiment.