PP: Gross Profits Declined and Accidental Maintenance Extensive
Introduction: Recently, the PP market has continued its downward trend. Most PP producers faced increased financial pressure because of profit losses. There were more accidental unit shutdowns, and the output loss caused by maintenance reached a yearly high. Although fundamentals improved slowly, pre-holiday inventory pressure still hindered the PP price. SCI predicts that it may be hard for PP prices to break free from a pattern of low-level volatility before the National Day and Mid-Autumn Festival holiday.
PP market prices were on a downtrend, and producers faced squeezed profits.
PP prices continued to perform weakly, impacted by newly added capacity and slow recovery in market demand. As of September 19, the monthly average price of PP raffia in East China dropped to RMB 6,839.12/mt, down RMB 177.07/mt MOM and RMB 658.98/mt YOY. Crude oil-based PP production costs dropped by 5.20% MOM, and coal-based ones remained largely stable. Other feedstock-based PP production costs increased to various degrees. Therein, PDH-based PP production costs rose the most by 3.59% YOY, and profit losses were aggravated.
PP output loss caused by maintenance grew to a yearly high amid extensive accidental unit maintenance.
A lot of PP producers such as Anqing Baiju Chemical New Material, Hengli petrochemical and Shandong Chambroad Petrochemicals arranged unplanned unit shutdowns. According to SCI, the PP output losses caused by unit shutdown will probably rise by 17.3% MOM and 45.36% YOY to 769.4kt in September. As of the week ended September, the output loss reached 202.8kt, a yearly high, easing the supply pressure.
PP prices likely to hover at lows before the holiday.
Recently, downstream industry profits have shown a moderate improvement, and downstream factories have been actively stockpiling when feedstock prices are low. In the short term, although the PP price decline is alleviated by costs and a gradual improvement in fundamentals, the market remains under pressure. Driven by expectations of inventory buildup during the National Day holiday, PP producers are actively cutting prices to reduce stocks before the holiday, weighing on market prices. Additionally, proactive low-priced presales of resources during and after the holiday by producers and traders have weakened downstream purchasing confidence. As a result, prices are expected to remain trapped in a pattern of low-level volatility before the holiday.
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