Will PP prices rise with the oncoming peak season?

Since August, the overall downward trend in the PP market has slowed down, but the stalemate remains. PP market keeps fluctuating with a monthly range of only around 50yuan/mt. PP plants restart gradually, and capacity utilization rates recover. However, there are no signs of improvement on the downstream demand side, and the willingness to actively procure remains low. Recently, PP futures has shown a strong performance, which has pushed spot prices slightly higher, while the spot-futures basis has weakened rapidly. As of Aug 27, mainstream traders offer for homo PP raffia are at 7570-7680yuan/mt In East China.

In terms of the reasons for the price increase, it can mainly be attributed to macroeconomic shifts and geopolitical situations. The Federal Reserve Chairman Jerome Powell has issued the strongest signal yet for a potential interest rate cut, boosting macro sentiment, leading the dollar to hit a one-year low, and resulting in a broad rise in stocks, bonds, and commodities. In addition, there have been sudden changes in geopolitical situations, raising concerns once again. Neither Hamas nor Israel agreed to several proposals from mediators, and no agreement was reached in the ceasefire negotiations for Gaza. Over the weekend, Hezbollah announced the start of large-scale attacks on Israel. Furthermore, the eastern Libyan government stated that it would halt all oil production and exports due to force majeure, which significantly boosted oil prices and accelerated their rebound following the announcement.

It seems that the rise in PP futures seems to have only a slight connection to its own industrial chain, namely that the peak season is approaching. However, based on market performance, the spot market is struggling to rise; at least at this stage, it is challenging to see significant increases.

As the peak season approaches, how will the market respond?

From the supply side, there are not many planned maintenance activities in September. Plants that were previously shut for maintenance, are expected to return to normal production, making an increase in supply pressure. An increase in temporary maintenance could alleviate some of the supply pressure, but this remains an uncertain factor.

From the demand side, there are certain expectations for the traditional peak season. A recovery in demand could lead to an increase in downstream operating rate, which would be beneficial for the consumption of raw materials. However, opinions on the expectations for the peak season vary widely. According to CCFGroup, the recovery on the demand side will take time and requires a process of recovering confidence. There is also the possibility that the peak season could be delayed or postponed.