PP Supply not Plentiful with Fresh Capacity and Extensive TA in a Struggle
Preamble: China’s PP monthly output climbed in May 2023 due to the fresh capacity release and more natural days in the month. But SCI learned that unit turnarounds (TA) and operating rate reduction were extensive, and the monthly operating rate declined by 0.94 percentage points M-O-M and 5.16 percentage points Y-O-Y. The supply pressure was not high. In terms of specific categories of PP, their supply performed differently with capacity expansions and unit turnarounds coexisting. The downstream demand was insipid amid the dull season. Prices of various PP categories declined, but raffia prices decreased the most. The price spread between raffia and most of the other categories widened.
The output at Weifang Shufukang New Material Technology second line has been put into China’s PP output statistics since May. China’s PP output reached 2,596.5kt in May, up 2.53% M-O-M and 3.41% Y-O-Y. The daily output of PP lingered around 83.7kt in May, falling by 0.78% M-O-M.
PP output in regions saw ups and downs. Therein, the output in Northeast China rose the most by 8.42% M-O-M as the 1# unit at Hengli petrochemical resumed normal production. However, the output in Southwest China and Central China declined by 10.12% and 14.00% M-O-M respectively because Sinopec Luoyang Company double lines, Sinopec-SK (Wuhan) Petrochemical STPP line and PetroChina Sichuan Petrochemical whittled down operating rates.
PP output via different feedstock sources changed narrowly, except for outsourced propylene-based output. Yunnan Yuntianhua Group suspended production for a short time in May, but Lihe Zhixin New Material Technology maintained stable production and lifted output by 9.9kt, which promoted outsourced propylene-based PP output to grow by 13.4% M-O-M. Coal-based PP output shed 1.70% M-O-M as more enterprises underwent turnarounds or operating rate cuts, such as Shenhua Ningxia Coal Industry, Ningxia Baofeng Energy and Pucheng Clean Energy Chemical.
The unit turnarounds were still concentrated in May, but newly added units were operated steadily. The output of homo injection, low-MFR copolymer, TPP (transparent PP) and pipe materials registered an M-O-M increment, and therein, that of homo injection increased the most. However, the output of raffia, medium- and high-MFR copolymer, thin-walled injection, medium-MFR fiber and BOPP film materials showed an M-O-M decrease. Therein, high-MFR copolymer output in May plunged by 44.78% from April. PetroChina Daqing Petrochemical, Ningxia Baofeng Energy, Shaoxing Sanyuan Petrochemical and Yan’an Oil Refining Plant arranged turnarounds in May, and Shaanxi Yanchang Coal Yulin Energy and Chemical and Levima Group didn’t have production plans for raffia, so the raffia output dropped by 4.35% M-O-M.
As for high-MFR copolymer, its output decreased significantly, mainly as North Huajin Chemical Industries and Wanhua Chemical Group didn’t arrange production for high-MFR copolymer in May. Besides, Pucheng Clean Energy Chemical and Sinopec-SK (Wuhan) Petrochemical experienced turnarounds at the end of May.
For low-MFR copolymer, its output rose by 17.24% M-O-M. as Liaoning Bora Petrochemical, Hengli Petrochemical, Sinopec Maoming Petrochemical, Shenhua Xinjiang Energy, Shaanxi Yanchang Coal Yulin Energy and Chemical, Zhejiang Petroleum & Chemical uplifted production, and Ningbo Fund Energy, Weifang Shufukang New Material Technology and China Coal Ordos Energy & Chemical newly added production for low-MFR copolymer.
TPP output grew by 22.62% M-O-M, mainly propelled by the production resumption at Sinopec Zhenhai Refining & Chemical, Yunnan Yuntianhua and Sinopec Qilu Petrochemical, as well as higher projected production at Xuzhou Haitian Petrochemical, Sinopec-SK (Wuhan) Petrochemical and Sinopec Maoming Petrochemical.
Lackluster downstream demand was still the major factor dragging down PP market prices in May. Raffia prices remained in a downtrend, and prices in end-May fell by 4.96% from the beginning of May. Price declines of other categories were smaller than those of raffia, so the price spread between raffia and other grades mostly widened.
2023 Price Spread Among Various PP Grades in East China
First, homo PP injection output realized a remarkable M-O-M and Y-O-Y increment and became 264.1kt in May. The supply surge and weakened demand pulled down homo PP injection prices. The price spread between raffia and homo injection hovered at RMB 50-100/mt. Second, as for high-MFR fiber, its output collapsed in April but rallied in May, and its downstream demand continued to soften, so the high-MFR fiber prices in end-May declined by 4.75% from early May. The gap between raffia price and high-MFR fiber price enlarged as well. Third, low-MFR copolymer output ramped up M-O-M and Y-O-Y, but its production ratios were relatively low from February to April. Meanwhile, downstream users showed seasonal rigid demand for low-MFR copolymer, buoying low-MFR copolymer prices from the bottom line. Therefore, even though low-MFR copolymer prices lost ground, the price spread between raffia and low-MFR copolymer remained high at RMB 350-450/mt.
From June to August, it is predicted that PP output loss caused by maintenance will decline gradually with maintenance peak season ending. Moreover, there are capacity expansion plans in the next few months, so the PP supply pressure will probably mount up. In terms of import, it may drop in June but then will likely rebound from July to August, as downstream users such as automobile and home appliance enterprises may stockpile in advance given the upcoming demand peak season. Thus, the demand for PP, especially high-end and specific-purpose materials, may brighten in China. Meanwhile, for those high-end materials, their import dependence degree is high. Thus, PP imports are reckoned to grow between July and August. The overall demand may remain insipid from June to August in China, dampened by soft profits at downstream processors, traditional demand dull season and high temperature. In summary, SCI predicts that China’s PP market prices will spiral downwards from June to August, but the decrease may slow down in August due to the pre-peak season procurement from downstream users.
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