Will PP Market Prices Increase or Decrease?

After the trade war, the crude oil prices has remained high, supporting the PP market from the cost side. The PP prices fluctuated at high levels. Previously, Sinopec and PetroChina consumed the inventory slowly, and the downstream demand was sluggish, leading the PP market prices to remain weak largely. Recently, PP prices climbed up again. Mainstream offers for raffia-grade PP were RMB 9,850-9,950/mt, while those for injection materials were RMB 10,700-11,500/mt. Will the PP market prices continue rising or slip later?

The total apparent consumption volume of PP from January to July 2018 was 13,751.6kt, up 6.78% Y-O-Y. Accordingly, China’s PP output and import volume rose rapidly, so the total PP import volume was 2,222kt from January to July 2018. However, the total PP import volume was 1,197.3kt from January to July 2017. According to the experience in the previous years, the PP import volume always increased rapidly after July and August. After August, the import volume increased, and the maintenance was basically finished, so the PP inventory would increase quickly.

The period from 2014 to 2019 was the important stage for PP capacity expansion. The increase volume of PP capacity was merely same in Northwest China, East China and South China. As of August 20, the PP output at PetroChina Daqing Refining & Petrochemical was 291.2kt. The output of PA14D-2 products was 55.8kt. Sinopec Guangzhou, Sinopec Luoyang and Sinopec Zhongyuan Petrochemical continue to pay attention to the development of PP capacity and new types of products. PP output will continue rising step by step. There will be new PP units at many companies such as China Shenhua (Baotou) Charcoal Chemical Industry, Oriental Energy (Zhangjiagang) New Material and Wanhua Chemical Group (Yantai) to be put into operation in 2019, when PP capacity will be released intensively.

In general, the PP market prices will fluctuate at high levels in the short run. The crude oil will be consumed slowly later, and the maintenance of PP units basically ends, so the supply of PP will increase obviously. Then the PP prices are expected to decline.