PP Price Expected to Rebound with Demand Peak Approaching
Highlights: Recently, PP prices slightly trended downwards under the influence of costs and fundamentals. Crude oil values and the PP futures prices affected the market sentiment notably, and downstream demand had a significant effect on PP prices. Demand is sluggish at present amid dull season, arising worries of participants. It is predicted that PP prices will inch lower in the short run. However, the prices are expected to revive in the medium term as downstream users will probably stock up near the demand peak season.
High crude oil prices underpinned PP prices.
Crude oil prices saw ups and downs around a high level, disturbing the market sentiment. As of August 5, the West Texas Light crude oil futures settlement price at New York Mercantile Exchange was $89.01/mt, and the transaction prices hovered around $87.01-90.76/mt. The Brent oil futures settlement price at Intercontinental Exchange was $94.92/mt, and the transaction prices hovered around $92.78-96.4/mt. According to crude oil-based PP production costs, it was learned that production profits were negative with losses of RMB 1,200-1,300/mt.
Low downstream industry operating rates hindered the demand for PP.
Plastic woven, injection product and BOPP enterprises maintained relatively low operating rates, which constrained the demand for PP. SCI learned that operating rates at plastic woven enterprises hovered at 44%-46%, falling by 9%-11% Y-O-Y. Operating rates at injection product enterprises were 48%-49%, dropping by 11%-12% Y-O-Y. Those at BOPP enterprises were 55%-57%, dropping by 5% Y-O-Y.
Supply was not ample because lots of units remained in downtime.
China PP Unit Maintenance
Remarks: RS = restart, SD = shutdown
Operating rates at PP companies lingered at 78% as a lot of units remained in downtime. Supply pressure was not heavy.
The spread between spot price and futures price remained positive.
The PP futures prices and spot prices showed a similar trend, but their fluctuation range had big difference. As seen from the above chart, the futures prices dropped within a wider range than spot prices. Falling futures prices dampened market sentiment, but cost support diminished the downward range of spot prices. After drops, the futures prices and spot prices both rallied. Therein, the futures prices rebounded at a quicker rate than spot prices. Lackluster demand and inventory backlog of finished products limited the upward range of spot prices.
SCI reckons that PP market prices will continue to fluctuate in a certain corridor with mixed factors such as fundamentals, cost and sentiment. However, PP prices are estimated to weaken in the short run, as crude oil values are likely to inch down and PP demand is expected to stay muted amid dull season. Prices may encounter an inflection point in the medium run as the demand peak season will come in September and October, during which downstream buyers will probably be active in stockpiling.
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