PP market remains in doldrums

Since May, with the futures continue to fall, PP spot market sustains downtrend. Market participators lack confidence, and market sentiment is bearish. On May 17, mainstream traders offer for homo PP raffia at 7200-7300yuan/mt, the lowest since May 2020.

Spot prices have reached a lower level, so has the market hit bottom, or is there still room for decline?

First, on the supply side.

In May, there are many PP plants shut for maintenance. According to the preliminary statistics of CCFGroup, the loss of production due to plant maintenance is about 447,500 tons, a slight decrease compared to April, while no new plants will be put into production in April and May. Therefore, spot supply decreases, alleviating the supply pressure released by new startups (a total of 1.85 million tons/year) in the first quarter.

In the second quarter, around 2.4 million tons/year production capacity is planned to be put into production. Meanwhile, with the end of plant turnaround, the loss of production due to the plant maintenance in June may be greatly reduced. Therefore, the supply pressure in June will be more obvious.

Secondly, on the demand side.

In May downstream has basically entered the traditional off-season, although there is no obvious seasonal characteristics in the downstream market the demand is expected to be worse after all. Of course, the "sluggish demand in peak season" is also one of the reasons for the slump in the PP market in March and April.

Relatively speaking, the traditional off-season lasts for a long time and it is difficult to form a strong support for the market, but given the current low prices, speculative demand may break out in the case of low valuations.

Generally speaking, the short-term maintenance is good to support the market, but the improvement in demand is limited, and PP spot market is expected to consolidate at lows. Then, the pattern of strong supply and weak demand of PP will be gradually highlighted, and the PP market may continue to move down.