PP powder in a stalemate

Approaching mid-to-late Mar, although PP powder price moves higher sharply to around 8,950-9,000yuan/mt, it seems that the powder enterprises are also suffering.

First, the pressure on the cost side remains.

PP powder, as one of the downstream products of propylene, can be said to be the most tragic of all the downstream of propylene. It is not as profitable as propylene oxide and butyl octanol. Also, when propylene has troubles, PP powder is the first to be affected. Since late February 2021, the cash flow of PP powder has at a loss, with a loss of about 100-150yuan/mt at present. Propylene is relative strong recently, and the reasons are as follows: 1, as international crude oil continues to rise, the market have been boosted; 2, propylene oxide, butanol and other downstream products are profitable, and they are actively in procuring propylene. The trading pressure of propylene refineries are not heavy, and propylene price remains high; 3, CFR China propylene price maintains high, helping to boost the China domestic market price.

Due to the high cost, Shandong Luqing and Dongming Dongfang Chemical have shut for a short term. Dongfang Hongye, Shandong Hengyuan, Shandong Yuhuang and so on have all lowered their operating rates. Generally speaking, the operation of plants in Jiangsu and Zhejiang is relatively stable. However, Zhejiang Hongji Petrochemical has been shut on Mar 16 for around 15day, and the follow-up supply will be reduced to a certain extent.

Second, downstream demand is bearish.

The high price of PP powder has a direct impact on the downstream purchasing enthusiasm, and some even resist to the high-price goods. Plastic weaving industry, as the main downstream of PP powder, only operate at around 50%. Because of the weak demand, it is difficult to support the PP powder.

Third, Differentiation of inventory pressure.

According to the recent research, PP powder inventory shows a growth trend, but from a regional point of view, there is a relatively obvious differentiation. As for Shandong, due to low operating rates, the overall inventory decreased slightly; while in Jiangsu and Zhejiang, the operating rates is generally high and inventory increases, especially Sanjiang chemicals, Zhejiang Satellite Petrochemical, and Zhejiang Hongji Petrochemical, in which Zhejiang Hongji Petrochemical shut for maintenance on Mar 16 and inventory accumulated appropriately to deal with follow-up sales.

In the short term, the trend of propylene is strong, and firmly supported the PP powder, so PP powder does not have a downward trend for the time being. However, as there is no sign of improvement in downstream demand, which gives a limited boost to the PP powder market. Therefore, PP powder market is still in a stalemate, and it is easy to rise but difficult to fall in the medium to long term.