Influence of weak PP demand overweighing plant maintenance

Since April, PP market has been sluggish, and spot price has fallen. Downstream demand is poor, and market mindset is weak. With both cost pressure and demand resistance, and the impact of the pandemic, how will the PP Market develop?

1. The high cost is not only pressure but also motivation

At present, the cash flow of each production process of PP is still in a state of loss, and there is no sign of improvement, especially oil-based PP. Under the pressure of high cost, Sinopec and PetroChina has also implemented some production reduction measures, but the effect on the market is relatively limited, and the actual effect is not obvious.

From another point of view, high cost also means that raw materials have strong support for PP, and the basis for PP price increases is relatively solid. If the conditions are met, the market is more likely to rise. Of course, the so-called "conditions" require the cooperation of many factors.

2. More plants shut for maintenance in Apr compared with Mar.

According to the statistics of CCFGroup, the production loss of PP due to maintenance in April is close to 390kt (excluding the output lost due to the operating rate cuts), which increases from March (36.02kt).

At the same time, considering the high cost, it is not ruled out that the temporary shut of the plants continues to increase.

3. Downstream demand is lukewarm.

Although it is said to the peak season of BOPP market, downstream demand has not performed well, and even shows signs of weakening because of the pandemic. The weakening of demand is mostly attributed to transportation problems. With the frequent outbreak of epidemics in various places, the logistics and transportation has been restricted, and logistics transportation has become the biggest constraint on the circulation of market sources. Many companies have reported that delivery is difficult.

Another sign of weakening demand is the decline in corporate profitability. If the demand is acceptable and the enterprises have sufficient orders, why they make transactions with lower price?

In addition, the repeated ups and downs of spot prices also aggravated the wait-and-see mood of the market to a certain extent.

Generally speaking, at present, the supply side is profitable for the market, while the weak performance of the PP market is more due to the influence of the pandemic and the lower-than-expected downstream demand. Therefore, the recovery of demand is expected to become an opportunity for the turning point occurs, and it depends on the pandemic situation and logistics recovery.