PP Prices to Slide After Rises in Q2 amid Fundamental Changes
PP mainstream prices likely to edge down in Q2, 2024, pressured by fundamentals
China’s PP market prices are supposed to move up at first but then decline in Q2, mainly affected by supply-demand fundamentals. It is projected that there will be more newly added capacity in Q2, and some closed units may resume production. Therefore, the PP supply will mount up gradually. In terms of demand, it is relatively stable now, but the small demand slack season is predicted to begin in May. The oversupply will probably be more noticeable in the PP market, dragging down the average price of PP.
High supply pressure in Q2 with postponement of Q1 unit startup
The commissioning of some units has been delayed to Q2, when the newly added capacity may be around 1,850kt/a. Capacity release may be concentrated in May and June. Thus, the PP output will move up in Q2, despite relatively intensive unit maintenance. In terms of region, most of the fresh capacity is supposed to be in North China. PDH-based PP capacity may account for a majority during fresh capacity. It is worth focusing on the change in propane price and PDH profits.
Q2, 2024 China PP Newly Added Units
Q2 to usher in demand slack season, but policy incentive possibly to stimulate demand
Bulls and bears are likely to both continue in the macro environment in Q2, 2024. In China, the real estate market may perform poorly with grim new construction and sales data, which will reduce the usage of pipes and plastic woven products. That will probably dampen traditional downstream industry development and the PP stockpiling. Furthermore, the national policy is expected to remain loose, and the “replacing old consumer goods with new ones” policy may be further implemented. The new quality productivity will also be optimized and developed constantly. Therefore, the consumption may be bolstered by the above measures. PP demand from packaging materials and products is supposed to warm up periodically. However, the U.S. non-farm employment data has exceeded expectations, and the U.S. CPI remains high, so the Federal Reserve will not cut interest rates until June at the earliest, which will put pressure on China’s domestic commodity market.
From the perspective of PP demand side, some downstream industries of PP will gradually enter the demand off-season in the second quarter, especially in May and June when demand is expected to weaken. However, low inventory and policies such as “replacing old consumer goods with new ones” will gradually stimulate the PP demand from downstream enterprises, which will still support the PP market in the second quarter. In addition, China’s domestic PP prices are still at a low in the international market. Exports in the first quarter have brought additional impetus to the demand growth of PP. It is expected that China’s PP exports will probably stay favorable in the second quarter.
China’s PP supply and demand patterns improved in Q1, and feedstock cost remained high, promoting the mainstream price of PP to ramp up. It is predicted that China’s PP market prices may spiral upwards in the short run on the back of high crude oil values and passable supply-demand fundamentals. However, the PP market may enter the demand slack season later, and the PP supply may increase gradually. In this circumstance, PP market prices are assessed to pull back in Q2, 2024.
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