PP Prices Likely to Shed with Lukewarm Demand in Feb
Preamble: China’s PP market prices dropped at first but then rallied in January 2024, while its mainstream prices inched down. Then, China’s PP prices are supposed to drop after narrow fluctuations. February will encounter the Spring Festival holiday. PP supply may be relatively sufficient, but the market demand may hardly perk up, hindering the price.
China’s PP market prices dropped at first but then rallied in January 2024, while its mainstream prices inched down. PP supply mounted up with less unit maintenance. As for the demand, downstream enterprises showed softer enthusiasm in production because of the medium-to-high inventory of semi-finished products and their stronger intention of recouping funds before the Spring Festival holiday, and they mainly stocked up moderately at low prices. Thus, PP supply-demand fundamentals performed weakly, and the PP futures prices declined consecutively in early January, dampening the stance of market participants and spot offers for PP. The trading atmosphere improved narrowly as buyers stockpiled at lows. In the second half of January, the PP futures prices stabilized, and there was bullish news from the macroeconomic environment, so PP market prices spiraled upwards. However, downstream stockpiling came to an end with the Spring Festival holiday approaching, leading to insipid deals. In East China, the highest price of raffia materials was RMB 7,455/mt in early January, while the lowest price was RMB 7,265/mt in mid-January. As of January 29, the average price of PP raffia was RMB 7,353.50/mt in East China, down 1.37% M-O-M and 5.38% Y-O-Y. PP copolymer prices averaged RMB 7, 512.75/mt, down 0.78% M-O-M and 6.15% Y-O-Y. The price spread between PP raffia and copolymer was enlarged to RMB 100-190/mt.
China’s PP supply is predicted to go up in February 2024, as previously constructed units may be operated more steadily, and the unit maintenance is likely to decrease. Meanwhile, imported cargoes are supposed to arrive at ports intensively after the Spring Festival holiday. Therefore, the overall PP supply may continue to climb in February. The PP output loss caused by maintenance may decrease by 16.95% M-O-M to around 436.2kt in February 2024. The total PP output may slide to around 2,850kt because of fewer natural days in February, but the daily output may show an M-O-M increase. In terms of import market, it is predicted that China’s PP import volume will probably be stable-to-dipping in February, which may drop by 14.36% M-O-M to 322kt in February. Generally, the PP market price may still face certain pressure from the supply side.
China’s PP demand will probably drop notably in the first half of February 2024. After the Spring Festival holiday, downstream users will probably be wary about buying, so the limited demand release may hinder the PP market. The demand may further improve in March with downstream processors resuming production, and it may be released steadily in April.
SCI predicts that China’s PP market prices will probably be range-bound at first but then drop in February 2024. Crude oil prices increased slightly, bolstering the market sentiment and PP production costs. The monthly average price of crude oil rose by 1.81% M-O-M to $78.65/bbl, indicating that crude oil-based PP production costs grew by RMB 111.25/mt or 1.36% M-O-M. It is estimated that international crude oil prices may fluctuate upward in February, and the price increment is likely to be moderate. The interest rate cut may hinder the USD appreciation, supporting the international crude oil prices to rebound. Moreover, the crude oil production cut will probably underpin the international crude oil prices. Overall, it is predicted that international crude oil prices will probably fluctuate upward in February, lending stronger cost support to PP prices.
Despite certain cost support, PP market prices may move down in February amid soft fundamentals. PP supply is supposed to grow gradually in February 2024 amid less unit maintenance and further release of fresh capacity. As for demand, it may decrease in early February, and it may hardly improve after the Spring Festival holiday as downstream users may stockpile cautiously. The imbalance between supply and demand will possibly drag down PP mainstream prices in February.
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