Mixed PP Prices in Q1, 2024 with Supply Rise and Limited Demand Improvement
Preamble: China’s PP mainstream prices edged down in 2023. PP supply is projected to be ample in Q1, 2024 in China. The downstream demand for PP may pick up before the Spring Festival holiday, but its improvement will possibly lack continuity, pressuring the PP price somewhat in Q1, 2024.
In terms of supply, China’s PP capacity reached 39,340kt/a in 2023. It is predicted that around 2,300kt/a PP capacity will probably be put into operation in 2024, which may emerge at Anhui Tianda Petrochemical, Huizhou Lituo New Material, PetroChina Guangdong Petrochemical, etc. China’s PP supply may further mount up with fresh capacity released, cutting the support for PP prices from the supply side. SCI reckons that China’s PP output may realize 8,750kt from January to March 2024, up 13% Y-O-Y. Specifically, the PP output in February may hit the lowest level in Q1, 2024 because of the Spring Festival holiday and sparse natural days in February, but the output was still higher than that in February 2023. Besides, PP output may also level up in January and March 2024.
China’s PP demand will probably rise at first but then weaken in January 2024. Specifically, the downstream demand is expected to trend flat-to-up in the first half of January, as downstream enterprises have certain stockpiling needs. However, the demand may soften after mid-January with downstream purchases coming to an end. The demand improvement may promote the PP price to warm up, but high finished product inventory and limited new orders may restrict the price growth. In February, downstream plants will enter the Spring Festival holiday, reflecting that the PP downstream demand may further weaken to the lowest level in Q1. Then, the downstream demand may perk up gradually in March as downstream enterprises resume production successively. Generally, the PP demand may show a V-shaped trend in Q1, 2024.
Crude oil prices are supposed to hover at highs in Q1, 2024, bolstering PP prices from the cost side. In terms of fundamentals, PP supply is supposed to advance gradually in Q1, 2024 with capacity expansion, and the downstream demand may brighten periodically. However, the overall downstream demand for PP may stay limited in Q1, 2024 without enough bullish factors. Specifically, PP prices may pull back after growth in January. In February 2024, PP mainstream prices may register a downtick because of the weakened demand influenced by the Spring Festival holiday. However, downstream plants may resume business in March 2024, suggesting improving demand for PP, which may promote PP market prices to rebound slightly. In summary, PP prices are supposed to rise at first but then drop in Q1, and its mainstream prices may inch lower.
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