PP market may keep fluctuate in the short-term

On Jun 21, PP futures finally ushers in a slight rebound after eight consecutive decline, and there is still an upward trend boosted by the rise in crude oil. At the same time, as PP futures rebounds slightly, spot prices mostly stabilizes. Market transaction has improved, but the transaction prices are still low. As of Jun 21, mainstream traders offer for homo PP raffia are at 8,500-8,550yuan/mt in East China, and at 8,430-8,500yuan/mt in North China.

Of course, the improvement in market turnover does not rule out the existence of speculative demand arising from the price falling to the previous low level.

From a fundamental point of view, the operating logic of the short-term market remains basically unchanged, and it is still a game between strong costs and weak demand.

1. Strong cost

Judging from the cash flow of each process, using the homo PP raffia price as the basis for calculation, the cash flows are basically still in a state of loss. Among them, the cash flow imported propylene and PDH are relatively good, and they can basically achieve breakeven at present; while the cash flow of coal-based PP has once again become the bottom of all production processes due to the sharp rise in coal prices in the second half of May.

To put it simply, the support from PP cost side has been in existence since the beginning of 2022, and it is relatively strong. Under normal circumstances, the cost support will continue to exist in the future.

2. Weak demand

As the weather gets hotter, downstream has gradually entered the traditional off-season of demand. It is reported that the average operating rate of the plastic weaving industry is close to 50%, while the average operating rate of the BOPP industry is relatively stable, about 60%. According to market research, the current downstream orders are mediocre. For example, the orders of BOPP enterprises are mostly maintained in 7-15 days. The follow-up on new orders is greatly affected by price factors, and the inventory of finished products in some enterprises is relatively high. In this way, if the downstream demand continues to weaken and the market competition intensifies in the future, enterprises may also take measures to reduce production and adjust down their offers.

All in all, the current PP market still lacks relatively clear guiding news, and the PP spot price is expected to remain range-bound.