Increase in downstream orders in the market for commercial inventory reduction of polypropylene
2023/9/5
1： Maintenance losses or offsetting a portion of new production can alleviate limited supply pressure
The maintenance loss in August was 410500 tons, including a total production capacity of 8.93 million tons; The planned maintenance loss in September is 300100 tons, and the accidental maintenance loss is about 150000 tons. The maintenance loss may increase month on month; The main reason is that the expectation for propane in Saudi Arabia's CP in September is high, and the raw material inventory of PDH enterprises has bottomed out, leading to increased uncertainty in the future;
In terms of production, most of the new units put into operation in August failed to meet the schedule. Ningxia Baofeng 500000 tons/year, Gansu Huating 200000 tons/year, Donghua Maoming Phase I 400000 tons/year, and Ningbo Jinfa Line 400000 tons/year were postponed to September. The instability of the new units may to some extent lower the utilization rate of polypropylene overall production capacity, but the increase in production may show an inevitable trend; Overall, there may be a significant increase in polypropylene production in September, and the utilization rate of production capacity may decline in anticipation of unstable operation of new devices and increased cost maintenance. It is expected that the domestic polypropylene production in September will increase by 4.91% month on month to 2.95 million tons, and the capacity utilization rate will decrease by 1.51% month on month to 78.20%.
2： Downstream industry average month on month increase BOPP has formed positive feedback on PP demand
At the end of August, the average operating trend of the downstream polypropylene industry saw a slight shift, with the operating rate increasing by 0.67 percentage points month on month to 48.14%; With the continuous rise of PP prices, downstream cost support has strengthened, and prices of various products have also increased, to some extent stimulating downstream restocking, with most industry orders slightly increasing.
Among them, BOPP showed significant performance. The main reason is that film companies have maintained a low profit or inverted position since the beginning of this year. With the increase in raw material costs and the implementation of BOPP film companies' policy of reducing negative insurance prices, film companies have increased prices and industry profits have been restored; And as prices rise, stimulating downstream restocking demand, enterprise orders improve, and the BOPP industry shows a positive feedback trend towards PP demand.
3： Pay attention to changes in inventory trends, inventory may be a leading indicator for the next market trend
As of August 30, 2023, the total commercial inventory of polypropylene in China was 717000 tons, a decrease of 40800 tons compared to the previous period and a decrease of 5.38% month on month. At the end of the month, contract holders actively issued orders to complete the sales plan, and inventory was transferred to the intermediate stage. This week, the inventory of production enterprises continued to decline. During the week, the market reported a slight increase, with most intermediaries having bullish expectations for the September market and a high willingness to buy on dips. Sample traders' inventory slightly increased. Due to the increase in subsequent maintenance plans in South Asia, there are expectations of supply tightening. Domestic production enterprises and trade have seen business opportunities, and export operations have increased. Port inventory has been depleted within the week. Overall, the total amount of commercial inventory in this period has decreased
In the short term, as prices rise, the demand for polypropylene shows positive feedback, leading to a decrease in commercial inventory of polypropylene and an increase in downstream orders. However, in the future, a significant increase in production may lead to sufficient on-site supply. If the PDH device undergoes large-scale maintenance due to profit reasons or alleviates supply pressure to a certain extent, and if the production enthusiasm of the enterprise remains high, with the smooth production of the new device, there may be stampede shipments on the site, thereby suppressing the space for price increases; It is recommended to pay attention to the trend of commercial polypropylene inventory in the future.
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