PP Supply Pressure to Stay High amid New Capacity, Despite Maintenance Rise
Introduction: PP producers have maintained relatively low operating rates recently because of more unscheduled unit turnarounds, but capacity expansion still pushes up the supply pressure. This exerts softening support on the PP market price.
In 2024, operating rates hovered at a past five-year low in 2024. First, the market demand continuity was limited, constraining the producer inventory consumption. Thus, producers were inclined to shut units down or cut operating rates. Second, long-term profit losses ratcheted up producers’ willingness to reduce output. The capacity of PP units that underwent turnarounds this year was large, along with long-time and high-intensity turnarounds. The turnarounds intensity in H1 2024 was stronger than that in H2. China’s PP unit operating rate slipped this month amid more unit turnarounds, but the output grew due to the one more working day of production in October compared to September. The output loss caused by unit shutdown was predicted to climb by 92.2kt to 621.5kt in October, and the actual output loss was 529.3kt in September. Around 14 sets of PP units started to experience maintenance in October, around 19 sets of units resumed production, while 21 sets of PP units remained in shutdown.
The newly added units at Grand Pacific Petrochemical Phase I, Anhui Tianda Petrochemical and JINNENG Chemical (Qingdao) Phase II 1# line have been put into operation and run steadily currently. As of the end of October, China’s PP capacity reached 41,870kt/a in 2024. For the 350kt/a new PP unit at INEOS Sinopec Tianjin Nangang, its cracker had a test run in late October, and the PP unit has come onstream and produced qualified products. The Inner Mongolia Baofeng Coal-Based New Materials project with capacity of 500kt/a is projected to come on stream in late November. Shandong Yulong Petrochemical plans to put its phase I unit with capacity of 1,100kt/a in November. The overall impact of new capacity on the PP market may be relatively noticeable.
At present, PP supply change is dominated by unit turnarounds and capacity expansion. SCI reckons that China’s PP supply may keep growing in the short run, as closed units resume production gradually and new projects are put into use.
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