PP Demand Improvement Encounters Capacity Release in Mar
Preamble
PP downstream companies uplift operating rates gradually with temperature going up in March, reflecting that downstream demand for PP is improving. That underpin PP prices a lot. However, there are many commissioning plans in 2022. In March, PP supply is expected to achieve an increase with lots of units to be put into operation. How will PP supply and demand trend in the future? What impetus will PP market encounter?
High Feedstock Cost Promoting PP Prices to Grow Notably
PP market prices grew notably. Taking PP raffia in East China as an example, the prices rose from RMB 8,570-8,650/mt on February 28 to RMB 9,250-9,350/mt on February 8, with an upward range of RMB 680-700/mt.
After the Spring Festival holiday, PP market saw continuous supply pressure, so fundamentals failed to buoy the market a lot. But crude oil values kept climbing recently, pushing up PP prices from the cost side. In recent days, WTI and Brent oil prices recorded high. Therein, Brent oil futures prices reached $140/bbl. PP futures and spot prices all gained ground. But high cost squeezed PP producers’ profits, so some producers started to cut back operating rates. The supply pressure is supposed to be alleviated.
Expected Improvement in Demand to Underpin PP Market
SCI predicts that cost support to PP market will stay firm in the short run, and brightened demand will also give wings to the market.
The downstream operating rate has shown a more obvious improvement recently. After the Spring Festival holiday, downstream production has resumed one after another, especially recently, the overall operating rate level at downstream companies has risen remarkably. According to the usual practice, the downstream industry will gradually enter the peak season of demand in March, during which the downstream operating rates will continue increasing, which will further ease the PP supply pressure.
At present, due to the continuous rise of PP prices, downstream production profits decrease. Downstream companies show insufficient interest in stockpiling. However, their production profits will increase gradually with prices of their finished products rising. Their feedstock inventories will also be consumed gradually. Accordingly, SCI predicts that downstream demand will be brightened, which will become a boon to the PP market.
Capacity Release Meeting Unit Maintenance
In 2022, SCI predicts that newly added PP capacity will reach 6,830kt/a in China, and 530kt/a units have been put into use. In March, it is projected that newly added capacity will be 1,350kt/a. So far, the 100kt/a unit at Xuzhou Haitian Petrochemical (Daqing Haiding project) has been put into operation smoothly. The 300kt/a unit at Sinopec Zhenhai Refining & Chemical Phase II has succeeded in PP trial production. The 450kt/a unit at Zhejiang Petroleum & Chemical Phase II (second line) is supposed to have a test run in March. Besides, some other units are likely to be put into operation this month. All in all, new capacity will have a large impact on the PP market.
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