Polypropylene market stops falling and stabilizes
2023/6/19
First of all, prices have fallen for a while after the terminal low price replenishment. Since June last year, the domestic polypropylene market has basically been on a continuous downtrend, especially in May this year, when the market once again saw an accelerated decline against the backdrop of a poor economic environment and sluggish demand. But this sharp decline also allowed the market to fully release its risks, as the market fell, downstream companies are suppressing their raw material inventories at historic lows, and once terminal demand gained momentum, downstream companies with low inventories began to replenish their stocks at low prices. For example, the summer catering and milk tea demand increased, driving part of the thin-walled injection molding class demand, these terminals short-term replenishment demand became the main source of power to stop the market stabilization.
Secondly, the enterprise start-up rate phase down. The impact of the recent polypropylene enterprise maintenance, short-term product supply capacity is still a trend of reduction. Along with intensive parking of petrochemical plants, polypropylene capacity utilization is expected to drop to around 75% in mid-June, a weekly decline of 3%. Against the backdrop of reduced product supply and low prices, producers began to firm up their offers, which was one of the positive factors that led to a short-term turnaround in the market.
Again, the cost side support has also been enhanced. As we enter the summer, oil-based polypropylene upstream cost support is evident, driven by production cuts and expected good demand for fuel in the summer. Propane and coal-based cost support has loosened, but is still stable. In addition, the situation in Russia and Ukraine is difficult to turn in the short term, the U.S. consumption season is driving demand growth, and fundamentals continue to improve.
Overall, the short-term polypropylene market stabilization trend is obvious, but with the new production capacity has been put in place, the supply side has a certain increase is expected, and short-term replenishment behavior should be completed this month, downstream enterprises will still be on-demand procurement thereafter. With the support of the cost side and the warming base of the transaction atmosphere, the polypropylene market is expected to further stabilize and bottom out, with a higher probability of a mild recovery in the polypropylene market in the second half of the year.
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