SunSirs: Loose Supply, China PP Remained Stable with a Slight Decrease in August

According to the Commodity Market Analysis System of SunSirs, the domestic PP market fluctuated and consolidated in August, with most brand products experiencing narrow price reductions. As of September 1st, the mainstream offer price for wire drawing by domestic producers and traders is around 7,180 RMB/ton, a decrease of -1.51% compared to the price level at the beginning of August.

In terms of raw materials: In the first half of August, the geopolitical situation in Eastern Europe gradually eased from tension, and market concerns about unstable crude oil supply eased. At the same time, OPEC+production expectations became clear, and negative factors in international oil prices continued. In the latter half of the year, the trend of propane followed the decline of crude oil, and the cost support for PDH manufacturing enterprises continued to weaken. The supply of propylene was first tight and then loose, and the price rose slightly before being hindered. In addition, the general follow-up of downstream demand may drag down the future market trend. Overall, the prices of various PP raw materials provide average cost support.

Supply side: The operating rate of domestic PP enterprises remained stable and slightly increased in August. As of the time of writing, the overall load level of the domestic industry has increased by 3% to 80% compared to early August, with an average weekly total output of nearly 810,000 tons in recent weeks. In the latter half of the year, the first and second lines of Zhejiang Petrochemical and Jingbo Polyolefin will resume work successively, coupled with the approaching production of the 900,000 ton new production line in Daxie, Ningbo. The trend of loose market supply is clear, which seriously limits the support from the supply side. At present, the on-site supply remains abundant, and the inventory level has slightly decreased to below 770,000 tons, which is relatively controllable. Overall, the support for spot prices from the PP supply side has not improved, and it may continue to exert pressure on the market in the first half of September. During the centralized maintenance of Zhenhai Petrochemical, Ningxia Baofeng, and Daqing Refinery in the future, there may be some relief.

In terms of demand: In August, polypropylene is in the transition period between peak and off peak seasons. As the end of the month approaches, market players are looking forward to and preparing for a surge in PP demand. However, the trading atmosphere in the field remained light. Merchants have started stocking up slowly, and new orders on site still tend to be mainly scattered small orders and contract deliveries. The improvement of source liquidity is limited. The median load of downstream enterprises has slightly increased, and there is a potential willingness to build warehouses in areas such as plastic weaving, construction, and agriculture. At the same time, there are macro guidance on supply side reforms and other news, and the market has solid bottoming forces. It is recommended to closely monitor the downstream construction dynamics.

The domestic PP market prices fluctuated weakly in August. Fundamentally speaking, the upstream raw material market is weak, and the overall support for PP is weakened. The industry load is high, stable, and slightly rising, and there is a short-term expectation of loose supply in the future. In terms of consumption, it is at the junction of peak and off peak seasons. The current market is waiting for a surge in consumption, with a hidden atmosphere of seasonal speculation. At the same time, the global central bank meeting released strong macro expectations, and it is expected that the PP peak season market will start in the second half of September.

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