PP market may keep strong

The international crude oil plummets at the beginning of this week, and PP futures-spot market weakens. Since then, supported by many positive factors, PP market strengthens again. On Jul 22, mainstream traders offer for homo PP raffia at 8,560-8,650yuan/mt, and offers for low-MFR co PP are at 8,650-8,800yuan/mt. And on Jul 21, the Sep futures contract price is at 8,725yuan/mt in night trading session, the highest since late May.

First, many plants shut intensively, and supply decreases.

Since mid-July, more and more upstream plants shut for maintenance, including Haiguolongyou #2, Zhongtian Hechuang #1, Jiutai Energy, ChinaCoal Mengda, which basically produce homo PP raffia for a long time. Also, some plants switch their production line. Although Shenhua Xinjiang and Shenhua Ningxia Coal I #2 has restarted, the daily output of raffia decreases significantly, with a daily output of 34-35kt in the previous period to the current 24-25kt. The proportion of production has increased from about 40% in the previous period to less than 30% at present. According to the statistics of CCFGroup, in July, due to the plant shutdown and maintenance, the production loss is about 272kt.

Secondly, with regard to the new plants, the startup of new plant delays.

In July, Qingdao Jineng Technology I is planned to be put into production, but until the end of July, there is only news of a test run, and it may officially put into production at the end of Jul. Fuhaichuang plans to put into production in Aug.

Thirdly, support from the raw material is still strong.

According to preliminary statistics, at present, only oil-based PP and propane dehydrogenation-based PP are still profitable, other processes are basically at a loss or on the verge of loss, especially MTO PP and coal-based PP as the price of methanol and coal is relatively high. However, even for oil-based PP and propane dehydrogenation-based PP, the cash flow is not as good as the previous stage, and is currently maintained at 400-600yuan/mt.

Last but not least, PP futures is strong, the spot homo PP raffia is basically in discount with the Sep contract price.

Seeing from the bearish aspect, it seems that there is only one point, that is, the downstream demand is weak, and the enthusiasm for purchasing raw materials is not high, which can also be attributed to the recent high prices of homo PP raffia.

In summary, the current market has been strong supported, and PP may continue to remain strong, as long as the crude oil and PP futures do not turn soft. After all, market sentiment is very crucial at this stage. However, in view of the current downstream procurement and market transactions, the upward potential is relatively limited.