SunSirs: Limited Recovery in Supply & Declining Cost Support — China PP Market Experiences Volatility and Downward Pressure

According to data from SunSirs' "Spot Connect" service, the domestic PP market experienced high-level volatility in early-to-mid April. Prices for various product grades saw more declines than increases. As of the publication date on April 21, the SunSirs benchmark price for PP wire-drawing grade material stood at 9,183.33 RMB/ton—a 0.18% increase compared to the beginning of the month.

Currently, market concerns regarding the impact of geopolitical factors on crude oil production and transportation in the Middle East have somewhat eased. The premium built into international oil prices—previously driven by geopolitical risk—has rapidly shifted to reflect expectations of diplomatic de-escalation, compounded by bearish market fundamentals. Signals regarding US-Iran negotiations continue to emerge; navigation through the Strait of Hormuz has intermittently resumed; the IEA has downgraded its supply-demand forecasts; and API data indicates a surge in crude oil inventories. Under the combined influence of these multiple factors, a pattern of weakening crude oil prices has emerged, causing the long-term cost outlook for PP to retreat from its previous highs. Regarding propylene, the concentrated maintenance shutdowns at various production facilities—scheduled for the previous period—have largely concluded. Demand remains steady as downstream buyers continue to procure material; although spot prices had previously surged to high levels, their price center has recently undergone a slight correction. Regarding propane, while port arrivals remain relatively low, prices for overseas cargoes—which had previously reached high levels—have undergone downward corrections, leaving domestic spot prices largely firm in recent days. Overall, price trends for various PP raw materials are mixed, resulting in a slight loosening of cost-side support for PP.

Supply Side: In mid-April, the domestic PP sector witnessed a mixed pattern of maintenance shutdowns concluding and production lines restarting; consequently, the overall operating rate saw a slight recovery. As of the publication date, the industry's overall operating load has risen to approximately 71%. During this period, maintenance shutdowns were successively implemented at eight facilities—including those of Jinneng Chemical, Yulong Petrochemical, and Zhongsah Tianjin—while seven facilities—including Zhenhai Petrochemical (Line 2) and Zhonghan Petrochemical—resumed operations. The scale of lost production capacity within the industry has contracted, and current inventory levels have rebounded to approximately 800,000 tons, though the volume of imported material arriving at ports remains at a low level. In summary, the supply side continues to provide a degree of support for spot market prices.

Demand Side: Influenced by the high levels reached by spot prices in the medium term, the overall trading atmosphere within the downstream market has become largely cautious. Contracts oversold by refineries in the previous month—along with "chase-the-rally" orders—have largely been delivered; consequently, the pace of current transactions has slowed, and the volume of new position-building activity has decreased. Buyers are predominantly adopting a "buy-as-needed" strategy, with transactions consisting primarily of scattered, small-volume orders. Resumption of operations remains limited among small and micro-sized downstream enterprises—many of which had previously curtailed or halted production due to intense cost pressures—while large and medium-sized enterprises continue to maintain a steady pace in their procurement activities. On the demand side, the overall sentiment remains one of "wait-and-see"; market performance has fallen short of expectations, offering only moderate support to PP prices.

Market Outlook: As April draws to a close, domestic PP market prices have retreated slightly from their recent highs, moving within a narrow downward range. From a fundamental perspective, industry operating rates have largely moved out of their historical lows, though the full restoration of supply volumes will still require some time. Social inventories have seen a modest uptick, while the arrival volume of imported materials at ports remains at a low level. Nevertheless, given the substantial underlying production capacity, current supply volumes remain sufficient to meet market demand. Regarding futures prices, recent trends have been bearish; the widening basis is currently exerting downward pressure on spot market prices. According to analysts at SunSirs, the current PP market is characterized by a tug-of-war between bullish and bearish forces, resulting in an ambiguous directional outlook. With upward momentum appearing insufficient, the market may still have further room to decline.

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