How does PP market perform after the Spring Festival holiday?

Around the Spring Festival, international crude oil rose rapidly due to geographical politics and local weather. WTI crude oil futures exceeded $93/barrel, hitting a new high since 2014, an increase of more than 6% compared with pre-holiday period. Therefore, on the first working day after the holiday, upstream chemicals all rose to varying degrees. Among them, PP futures rose by more than 4%, and the spot price also rose by 300-350 yuan/mt. In East China, mainstream traders offer for homo PP raffia at 8,800-8,900yuan/mt, and offers for low-MFR co PP are at 8,900-9,000yuan/mt.

PP has a good on the first working day after the holiday, what is the current situation of each sector?

1. Inventory

Changes in petrochemical inventories before and after the Spring Festival

From the perspective of petrochemical inventory, before and after the Spring Festival in 2022, the increase in petrochemical inventory is within a reasonable range, and in terms of absolute quantity, it is also basically at the medium level, and the pressure is not heavy for the time being.

2. Cost

Judging from the growth rate of the raw material side, the increase in the cost side of PP is mostly stronger than the increase in the spot price of PP, which also means that the sharp increase in the spot price of PP has not improved the efficiency of the industry, and the support of the short-term cost side is still strong. .

3. Production

Currently, few plants suspended production. Units like Grand Resource (Juzhenyuan) I, Hebei Haiwei and Xuzhou Haitian restarted operation near the Lunar New Year’s holiday. The overall operating rate of PP plants has climbed up to above 90%. During the LNY holiday, production and proportion of PP raffia in upstream companies sustained around 39% for long, with daily production around 38kt. With gradually recovering of logistics, supply of homo PP raffia was ample, which may impact market.

4. Downstream market 

Most downstream plants will resume operation near the Lantern Festival (Feb 15). Only sporadic plants have restarted now and focused on finishing orders taken before the LNY holiday. Demand for PP may be limited in short run. 

In summary, spot PP price is still expected to be mainly supported by cost but discounts may be available due to limited downstream demand. Overall spot price is anticipated to shiver at high level. The cost side and downstream demand should be noted.