PP market under pressure amid intensively recovered supply

During the National Day holiday, international crude oil rises sharply, of which WTI rose by more than $11/barrel, an increase of 16.54%. Under the strong boost of crude oil, market sentiment is good, PP spot market moves higher as a whole and the increase is also significant. However, after the holiday, in the expectation of the macroeconomic recession, international oil prices suspend uptrend and move down. Meanwhile, China domestic PP futures fall significantly on Oct 11, dragging down spot prices.

In addition to macro-level news, it is believed that the change in the pattern of supply and demand is the main reason why the strong market cannot last.

After the National Day holiday, Ningxia Baofeng II, Oriental Energy II #1, Fujian Gulei Petrochemical, Wanhua Chemical, Hebei Haiwei, Zhejiang Petroleum & Chemical II #2 and many other large plants resume production intensively, and they are mainly to produce homo PP raffia, which also lead to the overall PP operating rate and the production proportion of homo PP raffia rise rapidly. The current PP overall operating rate has exceeded 90%, and the production proportion of homo PP raffia once exceed 34%. In the short term, downstream demand has not significantly improved, and in the face of rapidly rising raw materials, some plants still resist to purchase the high-price goods. It can be said that the current PP market is a pattern of strong supply and weak demand.

In addition, judging from the situation of plant maintenance in the future, not many plants are planned to shut for turnaround in Oct, which also means that without special circumstances, the overall operating rate of PP may be maintained at 90% or more for a long time. At the same time, new plants are still expected to be put into operation, and the supply is certain to increase.

In this way, market trend in the future depends to a large extent on the downstream demand. But it is expected that downstream expectations for the peak season is not as good as in previous years, and market mentality is not optimistic. Most buyers may purchase on need. However, currently, PP has still strongly supported by the cost side, and the possibility of a deep fall is not high unless the cost collapse.

In the case of strong supply and weak demand, there is still some pressure on the October market, but there is no need to worry too much. Traders are suggested to pay attention to the real-time demand.