SunSirs: China PP Market Declined in October

After the National Day Hoolidays, the plastic industry has been dominated by bearish trends. On the macro level, the US dollar strengthened in October, and the performance of US economic data was eye-catching. The market is concerned that the Federal Reserve still has expectations of raising interest rates as a result. In terms of cost, due to the strengthening of diplomatic efforts in international geopolitical conflicts, the tension has been partially alleviated. Venezuela's export restrictions have also eased, with expectations of increased market supply and a weakening of crude oil prices due to pressure fluctuations. At the same time, downstream plastic enterprises are not actively willing to stock up, their consumption follow-up is lagging, and the market momentum is weak. Under the influence of declining consumption and cost fluctuations, the price performance of plastic futures has significantly declined.

According to the Commodity Market Analysis System of SunSirs, as of October 26th, the average monthly increase in spot prices of various products, from low to high, is PP (wire drawing) -3.13%, PVC-3.14%, and LLDPE-3.17%.

In early October, the domestic polypropylene market took on the peak season market in the early stage and started at a high price position. According to the Commodity Market Analysis System of SunSirs, the benchmark price of PP wire drawing material decreased by 3.13% compared to the beginning of the month as of October 26th. In terms of supply, the overall load of the domestic PP industry remained stable at around 80% during the month, with ample supply of goods on the site and some pressure on the supply side. Downstream, the plastic weaving load is above 45%, and the operating rate of film and injection molding enterprises is around 60%, with an overall stable position. Although the operating rate of PP's main terminal enterprises can maintain in the early stage, market consumption has contracted, buyers' willingness to stock is low, and there is a need for early supply to be digested. Upstream propylene has weakened due to factors such as unstable crude oil prices, while PDH has also declined simultaneously. Only methanol is operating steadily, and the raw material end tends to fall more or rise less, which has a poor support effect on PP. Futures have also been volatile and weak since October, with PP2311 closing at 7,529 on the 26th at a settlement price of 7,491, which is not a significant boost to spot prices. The decline in polypropylene this month is partly due to the retreat of the stocking boom, and secondly, due to the drag on the cost and demand sides. At present, there is a certain supply-demand contradiction in PP, and it is expected that the PP market may continue to operate weakly.

The spot market of October plastic futures and three materials weakened simultaneously. Macroscopically, the improvement of the external economic environment is limited. In the future, there may be expectations of an increase in crude oil supply, and the cost support effect of plastic far end may decline. At present, the construction of aggregation enterprises is relatively high and stable, and the supply of goods is abundant. The trend of plastic during the peak season has rapidly cooled down, and terminal enterprises are stocking around just in need. In summary, the current bearish outlook for plastic futures is mainly focused on weak costs and lagging demand. It is expected that in the short term, the guidance for the PE and PP plastic markets remains unchanged, and the market may continue to be weak. PVC may have the opportunity to recover due to the boost from futures.

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