According to data from SunSirs, the domestic PP market saw significant gains in July, with prices raised across various grades. As of July 31, the benchmark quote for PP (drawing grade) stood at 8,973.33 RMB/ton, marking a 13.01% increase from the beginning of the month.
Regarding raw materials: Contrary to the positive signals from US-Iran talks in June, the situation in the Middle East took a turn for the worse in July. Concerns over a potential blockade of the Strait of Hormuz resurfaced, leading to a return of the geopolitical risk premium. International crude oil prices rebounded rapidly, driving up the long-term cost basis for PP. Propylene prices surged in the first half of the month, buoyed by rising upstream costs and a recovery from late-June lows; however, prices fell back quickly in the second half as downstream buyers resisted high-priced supplies due to weak demand. Overall, cost-side support for PP remained strong throughout the month. That said, with raw material prices now pulling back from highs and the cost-driven momentum largely exhausted, support from the raw material side is expected to weaken in early August.
Regarding supply: July saw a mix of maintenance shutdowns and restarts among domestic PP producers, with the overall operating rate rising from a low level. Early in the month, Maoming Petrochemical’s Line 3 restarted, while Yulong Petrochemical’s Line 1, Fushun Petrochemical’s older line, and the Guangxi Petrochemical integrated project underwent shutdowns; Zhenhai Petrochemical’s Line 1 also underwent maintenance at the end of the month. As of this writing, the industry's overall operating load is around 70%, with weekly production nearing 730,000 tons. Current inventory levels hover around 450,000 tons, indicating generally ample supply. Looking ahead, more units are scheduled to restart, and CNPC Tarim is expanding capacity. Coupled with pressure from the 2609 futures contract, the expected increase in supply offers limited support for spot prices.
Regarding demand: Polypropylene consumption remains at off-season levels. Downstream markets show low acceptance of high-priced goods, resulting in a cautious trading atmosphere. End-user enterprises are purchasing strictly on an as-needed basis with little inventory accumulation; transactions largely consist of small, sporadic orders for immediate use. Operating rates among small and medium-sized enterprises have seen limited improvement, and a "wait-and-see" sentiment prevails in the market. Overall, demand-side support for PP remains weak. Domestic PP prices saw significant gains in July. Regarding market fundamentals, costs rose initially before pulling back, while industry operating rates increased. Demand remained in a seasonal lull, with little prospect of a significant surge in the near term. Amid the supply-demand imbalance, spot market supplies appear ample; analysts at SunSirs note that while PP costs remain high, the market is characterized by strong supply and weak demand. This tug-of-war between bullish and bearish factors may limit upward momentum, potentially causing the market to enter a consolidation phase.
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