Late Aug PP Market to Encounter Supply Growth and Demand Improvement
Highlights: Crude oil prices remained in a downtrend in early August, reflecting softer support for PP production costs and players’ sentiment. Besides, PP supply-demand fundamentals performed poorly, weighing down the PP market price. The downstream demand is expected to improve gradually with the demand peak season drawing near, and it is worth focusing on the demand improvement.
PP Mainstream Prices Dropped amid Soft Fundamentals.
PP mainstream prices inched down in early August. Crude oil prices decreased continuously, and PP fundamentals stayed weak. Specifically, downstream processors had weak interest in PP stockpiling during the demand off-season, pressuring the PP price, although the PP supply was not ample. The improvement in PP deals lacked continuity, slowing down the consumption of producers’ and traders’ inventory. As of August 8, the closing price of PP raffia in East China was RMB 7,065/mt, down 0.84% from end-July.
Slow Downstream Stockpiling Now, Which Likely to Improve in Late August
New orders at downstream enterprises didn’t improve notably in early August, leading to low operating rates in downstream industries. For instance, operating rates at plastic woven, BOPP and injection product sample enterprises were 41%, 56% and 45% respectively. Although downstream enterprises have a relatively low feedstock inventory level now, they continue to purchase at low prices on a need-to basis amid a dearth of confidence. Sparse deals hardly back the PP market. However, the downstream demand is expected to pick up gradually in mid-to-late August, with the demand peak season coming. It is worth focusing on the demand improvement.
PP Output Growing Steadily, and Supply More Plentiful
In August, the unit maintenance decreased. As of August 8, the proportion of unit shutdowns was 15.92%, down 1 percentage point from end-July. It is projected that CNOOC Ningbo Daxie Petrochemical may put its phase II first line into production in mid-August, which may drive up supply pressure. PP unit operating rate reached 78.53% during the first week of August, and weekly output was 778.8kt or so, up 14kt from the average weekly output in July. Generally, the supply pressure was not very high in early August, but unit restart and capacity release may cause more ample supply, weighing down the PP market price.
In summary, weak fundamentals continued in the PP industry. Limited deals amid demand off-season hardly supported the PP price, even though supply pressure was controllable. In the future, supply is supposed to climb with capacity expansion, while demand may improve gradually.
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