PP market welcomes uptrend amid optimizing pandemic prevention and control policy

In early-to-mid Dec, PP market surges periodically as economy expects to bottom out supported by policies such as the optimization of epidemic prevention policies. PP futures rise sharply, up nearly 300 points. However, with the cooling of market sentiment, PP futures weakens again, and spot prices track the downtrend. In East China, mainstream traders offer for homo PP raffia at 7,800-7,900yuan/mt.

However, among PP products, PP fiber is still strong, which is unaffected by the fall in futures.

Since the opening of the epidemic prevention policy, the periodic demand for protective equipment such as masks has broken out again, the demand for PP non-woven fabrics has increased and the prices of related raw materials have also risen. In Shandong province, it is reported that PP powder 225 price has risen from about 7700yuan/mt last Friday to the 8300-8500yuan/mt, an increase of nearly 600-800yuan/ton. Relatively speaking, the rise in PP granule is relatively moderate, but it also rises 100-150yuan/mt.

The reason lies in the mismatch between supply and demand, that is supply cannot catch up with the increase in demand.

PP powder

Due to the relatively high propylene price in Shandong, the cash flow of PP powder continues to face losses. The operating rate of powder plants in Shandong is not high, and some plants has been shut for a long time. At present, only several plants such as Luqing, Hongye,Shandong Kairi and Haiyi are still in production. According to CCFGroup, the average operating rate of sample powder plants in Shandong is about 22%, while the average operating rate of powder plants in Jiangsu and Zhejiang is about 80%. As a result, the price increase of PP powder in Jiangsu and Zhejiang is not as high as that in Shandong.

PP granule

As shown in the figure above, since the beginning of 2022, the production proportion of PP fiber has been maintained at around 5-15% for a long time, which is relatively stable in terms of supply, but it may be insufficient in the face of the sudden increase in demand. It is not ruled out that there will be a significant increase in the production ratio of PP fiber for a period of time in the future, while squeezing the production proportion of other products (such as homo PP raffia).

As for the space and duration of the rise, it can be learnt from the market in Apr 2020, but in terms of existing production capacity (whether upstream or downstream), the extent and cycle of this increase should be less than that of 2020.