Why PP market still depressed amid intensive shutdown?

As of late August, PP market still does not have a relatively clear expectation for improvement. Although PP market has been supported by the plant maintenance, it is still sluggish, and market mindset is confused.

First, support from the supply side.

According to the statistics of CCFGroup, as of Aug 22, the production loss of China domestic plants due to plant maintenance has reached 548,800 tons, far exceeding the previous level (469,900 tons in July).  Judging from the data alone, the maintenance intensity is not small, which involves several plants which mainly produce homo PP raffia, such as Shenhua Xinjiang, Dongming Hengchang, Liaoning Bora Enterprise Group and so on. Also, as some other plants change their production lines, the production ratio of homo PP raffia is maintained at 25% or below for most of the time.

Second, insufficient demand from end-users.

However, even supported by the plant maintenance, the market is still sluggish. It is believed that the main important factor is the lack of downstream demand. First of all, the repeated outbreak of the epidemic has seriously restricted downstream demand and logistics and transportation. Second, there have been continuous high temperature weather in many places this year, and there is a large gap in power supply. Power rationing policies have been implemented in many places, requiring industrial enterprises to stagger production during peak load times, mainly in Sichuan and Chongqing and Jiangsu and Zhejiang. Taking the BOPP industry as an example, BOPP can be said to be relatively healthy in the downstream of PP, but there has also been a decline in operating rate and orders recently, which shows that the current downstream demand is not enough to support the upward trend of the market.

Third, whether the peak season can be expected.

The golden September and silver October is coming soon, and many market participators are wondering whether the peak season can come. The traditional off-season is coming to an end. Also, with the relief of high temperature in the future, the power rationing policy is expected to be cancelled, downstream demand is expected to increase. However, upstream plants shut will restart gradually, and supply is also expected to increase. In addition, new plants such as CNOOC Ningbo Daxie petrochemical will be put into production soon, and the pressure on the supply side is still increasing. On the other hand, under the influence of the epidemic, it is uncertain whether downstream demand can recover. Therefore, it is expected that the demand in golden September and silver October in 2022 may still be not prosperous.