【SCI View】How Will PP Market Go With Stable Supply and Demand?

In the short run, the PP market prices meet upward resistance, but the prices will not be low with supply and demand remaining largely stable.

The price spread between spot PP and PP January dominant contract was always large, which was RMB 592-672/mt in October. Because the excessive price spread is attractive to funds, funds may flow into the commodity market, so prices of PP January dominant contract will not continue decreasing. In addition, in November, the price spread will recover. The supply of PP raffia will be insufficient, so the PP futures prices are expected to rise. The main reasons are as follows.

1. There are more units undergoing maintenance temporarily, leading to short supply of PP.In Q4, the intensive turnaround ended, so the PP supply increased from Q3. The output loss volume was 38.9kt, which also decreased by 19.95% from last week. However, more PP units undergo maintenance temporarily, including 320kt/a unit at Jiutai Energy Inner Mongolia, 400kt/a unit at CNOOC and Shell Petrochemicals Phase II and 350kt/a at Zhong’an United Coal Chemical. Meanwhile, the newly added capacity failed to be released steadily, so the supply of PP remained insufficient, supporting the spot PP price.

2. The overall operating rate of BOPProse, so the rigid demand for PP kept stable.

The operating rate of BOPP mounted up, while that of plastic weaving and PP injection remained stable. During the National Day holiday, the stopped BOPP units resumed production successively. Due to some force majeure factors, the temporarily stopped units for turnaround resumed production, and several units were still in downtime, so the operating rate increased by 6% W-O-W. BOPP enterprises maintained basic purchases, and their feedstock could be used for 4-15 days.

3. The price spread between PP granule and PP powderdiminished, with PP powder price rising.

The price of PP powder was high, while that of PP granule moved downwards. The average price spread between PP powder and PP granule was RMB 226/mt this week, up RMB 91/mt from last week. Usually, the rational price spread was RMB 300/mt.