PP Prices to Inch Higher on Demand Amelioration
Preface: PP mainstream prices moved up in August, and the upward range widened, supported by costs, macro environment and upcoming traditional demand peak season. In September, the demand is expected to improve, but PP supply pressure may pile up with unit maintenance ending gradually.
China’s PP market prices remained on an upswing. Taking PP raffia in East China as an example, its average price was RMB 7,360/mt in early August. PP price reached a high of RMB 7,620/mt on August 23, but then prices closed at RMB 7,650/mt at the end of August. As of August 31, the monthly average price of PP rose by RMB 240.14/mt or 3.22% M-O-M to RMB 7,461.09/mt, but it dropped by 6.65% Y-O-Y.
From the perspective of seasonal fluctuation characteristics, the tendency of PP price in August was in line with the characteristics of seasonal month-on-month rise in previous years, but the month-on-month rise is expanding, which is slightly deviated from the characteristics of narrowing year-on-year rise.
What drove up PP prices in August? First, energy prices performed strongly, underpinning PP prices a lot from the cost side. Therein, crude oil price, propane price and methanol price rose by 6.71%, 17.36% and 5.47% respectively. Second, policy and conference stimulated the real estate market and consumption and bolstered the market sentiment. Market players expect the implementation of more policies. Third, some PP downstream demand improved. Last, the inventory at PP producers and downstream processors stood at a medium-to-low level, and the expectation for demand peak season was bullish. Thus, PP producers were willing to maintain firm offers, and downstream processors stockpiled moderately.
PP market prices fluctuate upwards at present, and will PP prices continue to rise in September?
PP supply notably rose, as PP units ran at higher loads due to restarts of upstream enterprises, with output growth Y-O-Y in an upward trend.
China’s PP output and operating rates in August after M-O-M and Y-O-Y growth with less unit maintenance. The overall operating rate was 82.57% in August, which rose notably from 77.04% in July. Around 15 PP producers newly arranged maintenance, such as Bora Lyondellbasell Petrochemical and PetroChina Daqing Refining & Petrochemical. However, around 19 producers resumed production from maintenance, such as Tianjin Bohua Chemical and PetroChina Fushun Petrochemical. About 15 enterprises remained in downtime. The output loss caused by maintenance was 559.5kt in July and was estimated to drop by 172.5kt to around 387kt in August.
After the operating rate increment, China’s PP output also ramped up in August. From January to July, the output increased by 6.08% Y-O-Y, higher than that in the same period of last year.
China’s PP supply is supposed to gain ground in September with capacity release and maintenance decrease. The fresh projects at Ningxia Baofeng Energy Phase III, Oriental Energy Maoming Petrochemical and Ningbo Kingfa Advanced Materials are supposed to be put into use in September, impacting the PP market a lot. In terms of maintenance, the PP output loss caused by unit maintenance is likely to decrease by 26.74% to 283.5kt. Generally, China’s PP supply is predicted to mount up in September.
It is predicted that overall PP demand in September will likely grow M-O-M amid low inventory and positive outlook for demand during September and October. However, downstream plants still run at low operating rates now.
According to data monitoring of SCI, orders of PP downstream sample enterprises improved a little. In downstream industries, plastic-woven plants still faced heavy cost pressure and profit losses in an intense competition. Enterprises felt less confident because orders of plastic-woven bags saw limited increase. BOPP enterprises focused on the delivery of previous orders, as BOPP orders in August decreased M-O-M. PP profits were still bleak. Buyers resisted high-priced feedstock, although feedstock inventory stood at lows. It is predicted that they will purchase on a need-to basis in bargain-hunting. In injection molding downstream industries, orders for daily necessities, turnover boxes, and modified products increased. Therefore, PP demand in September is predicted to weaken Y-O-Y.
Based on the above analysis, PP market prices are predicted to rise in September, given positive macro environment and bullish energy prices. Meanwhile, seasonal PP demand is expected to pick up M-O-M, uplifting the market prices. However, the PP price growth will likely be limited, considering slow growth of demand and higher supply pressure.
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