PP market under supply pressure

On Jan 1, Indonesia announced a ban on coal exports from Jan 1 to Jan 31. Under the influence of the ban and the epidemic in Beilun, Ningbo, PP May futures contract opened high and then fluctuated on the first working day after the holiday, driving spot prices higher. Then, the market gradually returned to normal range, and PP spot prices also fell slightly.

On the whole, the ban on the export of Indonesian coal has more impact on market sentiment, while the Beilun epidemic in Ningbo has a more direct impact on the supply of PP. The PP plant in Beilun District involves a production capacity of 1.65 million tons/year, accounting for 5.24% of the national production capacity. At present, the PP plants of Ningbo Fortune and Oriental Energy II are operating normally, but a pass permit is required for delivery. FCFC Ningbo said that if there is any problem on the logistic transportation in the later stage, its PP plant may shutdown. In addition to the above-mentioned plants, Shaoxing Sanyuan has also been affected to a certain extent, as the propane needed for production comes from Beilun Port, so the 200kt/year the PP plant is possible to shut.

Then, after talking about the temporary situation, let's talk about the maintenance arrangements in the plan.

1. Plant maintenance.

Judging from the current situation, there are not many plants plan to shut for maintenance, but temporary shutdown is not ruled out. On the whole, the amount of maintenance losses in January is currently less than that in December, and several large plants, such as Sinochem Quanzhou, Sinochem Quanzhou II, and Grand Resource (Juzhenyuan) I, all have plans to restart in the second half of Jan, which also means that the overall operating rate of PP before the Spring Festival is expected to reach more than 90%.

2. Expansion schedules

According to statistics from CCFGroup, in the first quarter of 2022, the new production capacity of PP is planned to exceed 3 million tons/year. If all of them are put into production, the growth rate will be very obvious. Of course, the possibility for all these plant to start up is very slim. In January, Xuzhou Haitian (Daqing Haiding), PP plant #1 of Zhejiang Petrochemical II, and Gansu Huating are still very likely to be put into production, and the news of trial run has been reported previously.

To sum up, in January or even in the first quarter, the supply pressure on PP market is relatively large. Currently, under the poor downstream demand, PP prices are likely to fall.