【Market Analysis】

For the week ending August 14, the operating rate of downstream PP sectors fell by 0.08 percentage points week-on-week to 44.55%. Downstream willingness to purchase raw materials remained low, and demand continued to decline; the operating rate for plastic weaving—the primary downstream sector for yarn-grade PP—dropped by 0.12 percentage points to 40.06%. While BOPP orders saw a slight rebound, orders for plastic weaving products continued to decline marginally.

On August 14, previously idled units—such as Line 1 at Dushanzi Petrochemical—restarted operations, pushing the operating rate of PP enterprises up to approximately 76% (still a relatively low level). The production proportion of standard yarn-grade PP fell to around 22%. By Friday, petrochemical inventories had decreased by 20,000 tons week-on-week to 610,000 tons—155,000 tons lower than the same period last year—placing current inventory levels at the low end of the historical range for this time of year.

Regarding costs, the market remains focused on the situation in the Strait of Hormuz, awaiting developments on a potential US-Iran agreement. Additionally, both OPEC and IEA have lowered their forecasts for global crude oil demand growth, causing crude prices to fluctuate. PetroChina’s Tarim Petrochemical plant (450,000 tons/year capacity) commenced production in July, while China Coal Yulin’s Phase II project (450,000 tons/year) has entered the pre-commissioning stage and is expected to start production in September.

Operating rates for existing PP units have recently rebounded slightly. BOPP film prices stopped falling and rose somewhat this week; however, domestic end-user consumption lacks momentum. Downstream enterprises are struggling to secure new orders, profit margins are being squeezed by raw material costs, and downstream operations remain constrained. Purchasing remains cautious with no signs of concentrated restocking, meaning demand-side support for PP prices is weak. Sales pressure on petrochemical producers has eased, and the PP basis remains high, though overall spot market trading volume has not surged. While a provisional agreement regarding the Strait of Hormuz is possible between Iran and Oman, significant differences remain between the US and Iran, and the strait remains a focal point of tension. PP prices are expected to fluctuate in the near term; market participants should manage risks and monitor progress on the Strait of Hormuz situation. [Futures and Spot Market Trends]

Futures Market:

The PP2609 contract opened lower but then trended upward amidst fluctuating prices and a reduction in open interest. It traded between a low of 8,340 yuan/tonne and a high of 8,485 yuan/tonne, ultimately closing at 8,464 yuan/tonne—above the 20-day moving average—marking a gain of 1.01%. Open interest decreased by 19,596 lots to 379,941 lots.

Spot Market:

Spot prices for PP rose across most regions. Prices for yarn-grade PP were quoted at 8,550–9,160 yuan/tonne.

[Fundamentals Tracking]

Regarding fundamentals: On the supply side, units such as Dushanzi Petrochemical’s Line 1 restarted operations on August 14. Consequently, the operating rate of PP enterprises rose to approximately 76%—still a relatively low level—while the production proportion of standard yarn-grade PP fell to around 22%.

On the demand side, for the week ending August 14, the operating rate of downstream PP sectors edged down by 0.08 percentage points to 44.55%. Downstream willingness to purchase raw materials remained low, and demand continued to decline; the operating rate for the plastic weaving sector (a primary consumer of yarn-grade PP) fell by 0.12 percentage points to 40.06%. While BOPP orders saw a slight recovery, orders for plastic weaving products continued to decline marginally.

Petrochemical inventories fell by 20,000 tonnes week-on-week to 610,000 tonnes—a figure 155,000 tonnes lower than the same period last year—placing current inventory levels at the low end of the historical range for this time of year.

Raw Materials: Brent crude oil futures (October contract) fluctuated around $88 per barrel, while the CFR China propylene price rose by $10 per tonne to $1,080 per tonne. (Source: Sina Finance)

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