SunSirs: High Cost Support Drives China PP Prices Up in First Half of September

According to data from SunSirs, the domestic polypropylene (PP) market maintained a positive trend during the first half of September, with price increases across various grades. As of September 14, the benchmark quote for PP (drawing grade) stood at 10,100 RMB/ton, marking a 5.83% increase since the beginning of the month.

Price Trends

Raw Materials: During the first half of September, the situation in the Middle East remained volatile, with ceasefire agreements failing to materialize. Shipping risks in the Strait of Hormuz escalated, fueling market concerns regarding international crude oil supplies and driving up geopolitical risk premiums; consequently, the cost basis for PP rose to high levels. Propylene prices also increased, bolstered by the rise in crude oil. Despite an increase in propylene supply, the market was driven upward by the dual positive factors of rising crude oil and thermal coal prices. Overall, raw material costs provided strong support for PP during this period.

Supply: Entering September, domestic PP producers saw a mix of maintenance shutdowns and restarts, with the overall operating rate hovering near 70%—showing little fluctuation compared to the end of the previous month. Companies such as Guangxi Petrochemical and Dongguan Juzhengyuan have plans to increase operating loads, suggesting a slight expected rise in supply. Currently, average weekly production remains around 720,000 tons, while inventory levels are relatively low at approximately 540,000 tons. Overall, the slow recovery of supply and low inventory levels have provided a degree of support for spot prices.

Demand: Polypropylene consumption is currently in its traditional peak season; demand has gradually moved beyond off-season levels since the start of the month, with downstream markets slowly following suit. However, due to counter-seasonal cost trends and the fact that PP spot prices have already risen to high levels, buyer acceptance of high-priced stock is limited, resulting in a cautious trading atmosphere. End-user enterprises are favoring a "buy-as-needed" strategy, with orders mostly small and sporadic, and little enthusiasm for building inventory. Operating rates among small and medium-sized enterprises have improved slightly, with downstream operating loads just above 45%; overall, demand-side support for PP remains moderate.

Market Outlook

Domestic PP market prices saw significant gains during the first half of September. From a fundamental perspective, strong cost-side factors are providing support, though they also subject polypropylene (PP) to pressure from elevated costs that run counter to seasonal norms. On the demand side, orders are seeing moderate growth, yet downstream players remain cautious in their purchasing. Analysts at SunSirs believe the PP market is currently buoyed by cost support, as well as the tailwinds of the traditional peak season and a tight supply-demand balance. Future market trends will likely hinge on the resumption of production at key facilities and geopolitical developments involving the Middle East and US-Iran relations.

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