The Price Center of Gravity Shifted Downward in the Month, and the Supply Pressure Increased in December, with Bearish Expectations Existing
The Price Center of Gravity Shifted Downward in the Month, and the Supply Pressure Increased in December, with Bearish Expectations Existing
Key Views of the Month
This month, the domestic PP market fluctuated lower, and the overall price center of gravity was still lower than that of the previous month. As of November 29, the mainstream price of domestic wire drawing was 7400-7600 yuan/ton, 100-190 yuan/ton lower than that at the beginning of the month. From the perspective of the market outlook: from the cost side: after the international oil price has experienced a short-term continuous decline, the deepening of production cuts in the later stage is still a high probability event, and the focus is on the OPEC+ meeting in the later stage, and the medium-term crude oil maintains a range-bound operation. In December, the temperature is still expected to drop, the demand for civil using electricity will increase, the daily consumption of downstream power plants will increase, and the process of coal inventory destocking will be accelerated; On the supply side, the supply side of the market expanded production intensively in December, and at the same time, there were not many new maintenances, and the pressure on PP supply continued to increase. On the demand side, it is difficult to increase new orders in major downstream industries and they even show a gradual slowdown trend, and the demand for raw materials is weakening. From the perspective of speculative demand, the current midstream inventory is still not high, and the short-term planning would choose whether to build warehouses according to the rise and fall of the market, which has a relatively limited impact on the medium-term market; On the inventory side: According to the inventory trend in previous years, in view of the current petrochemical’s grasp of market demand and effective planning of production arrangements, it is expected that these two kinds of oil inventories will continue to operate at a low level at the beginning of the month, and the role of supporting the market will continue to exert force. To sum up, it is expected that the domestic PP market will show a downward trend in December 2023, and we will pay attention to the realization of new production capacity.
Chapter 1: Polypropylene Market Review of This Month
1.1 Analysis of polypropylene domestic market trend
Table 1 Changes in the Wire Drawing Price of Polypropylene in the Spot Market
Unit: Yuan/Ton
This month, the domestic PP market fluctuated lower, and the overall price center of gravity was still lower than that of the previous month. As of November 29, the mainstream price of domestic wire drawing was 7400-7600 yuan/ton, 100-190 yuan/ton lower than the beginning of the month. China's Q3 GDP data showed an upturn, macro expectations were bright, and signs of easing in U.S.-China relations were more obvious. Coal prices hit a new high, unplanned maintenance devices increased significantly, Qinghai Salt Lake, Chambroad polyolefin second line, Changzhou Fude, Shenhua Ningxia Coal and other units were shut down for maintenance, and the supply showed a tightening trend. In the first half of the month, the domestic PP market rebounded for a time. However, since the middle of the month, crude oil has fallen sharply, coal prices have loosened, and costs have fallen. With the gradual implementation of new production capacity and the resumption of work of maintenance enterprises in the early stage, domestic PP production has slowly moved up. The lack of substantial macro profits, Wenhua commodities continued to adjust downward, and PP futures fell day after day, suppressing the confidence of the spot market. The pressure on traders' shipments has increased, and some bearish market outlook has actively reduced their positions and shipments, and the market inversion behavior is widespread. Since the second half of the month, the PPI has been lowered one after another, and the support of the cost of supply in the field has weakened. In November, the increase of new downstream orders was limited, the operating rate of various segments declined, and the contradiction between supply and demand gradually intensified. PP prices fluctuated and fell.
Figure 1 Polypropylene Index Chart
1.2 Polypropylene USD Market Trend Analysis
This month, the domestic polypropylene dollar market continued to decline. As of the end of the month, the price of wire drawing at USD market was around 870 US dollars/ton, down 20-30 USD/ton monthly, the copolymer price was around 950-990 USD/ton, and the high-end price was lower by 10 USD/ton. The domestic RMB market weakened during the month, dragging down the performance of the US dollar. However, due to the recent shortage of imported resources, the decline in the US dollar market has been restrained to a certain extent. At present, the price difference between domestic and foreign markets still exists, especially the performance of copolymer is obvious, and there is a lack of buying orders under the high price of resource supply at the USD market, and the overall transaction performance is weak.
Table 2 Price Changes in the USD market of polypropylene
Unit: USD/Ton
1.3 Polypropylene Futures Market Trend Analysis
This month, the main PP 2401 contract rebounded briefly and then fell back. It opened at 7609 on November 1, with a monthly high of 7798 and a low of 7373, and closed at 7393 on November 29. In the later period, after the continuous decline of the market, the spot price difference narrowed, and the short-term fluctuation and repairment was the mainstay, focusing on the long-short game of 7300-7350.
Chapter 2 Analysis of Domestic Supply of Polypropylene
2.1 Polypropylene Yield Analysis
With the start-up of the 400,000 ton unit of Ningbo Kingfa's second line, and the shrinkage of maintenance enterprises in the month, the domestic polypropylene capacity increased slightly in November. China's polypropylene output in November 2023 is estimated at 2.7 million tons, an increase of 30,000 tons, or 1.12%, from 2.67 million tons in the previous month.
2.2 Maintenance Statistics of Polypropylene Enterprises
Table 3 Maintenance Statistics of Domestic Polypropylene Devices in November
Table 4 Maintenance Statistics of Domestic Polypropylene Devices in December
Chapter 3 Analysis of Domestic Demand for Polypropylene
3.1 Statistics on the Operating Rate of Polypropylene Downstream Enterprises
As of the end of November, the average operating rate of PP downstream increased to 55%, down 1% from 56% in the previous month. With the exception of non-woven fabrics, most of the subdivided downstream orders have decreased seasonally. Despite the impact of the Double 11 E-commerce Festival, there was no significant increase in related downstream orders. At the same time, the uneven order situation of leading enterprises and small and medium-sized enterprises still exists. At present, some large and medium-sized enterprises have a production capacity of 6-10 days, and these enterprises start up well, which can basically reach 50-60 percent, and the start-up of small and medium-sized enterprises is significantly lower, and the factory is mostly producing products based on sales and stepwise phased replenishment. At present, the profits of finished products in the downstream are still not high, especially the profits of small and medium-sized enterprises in the plastic weaving industry are basically flat or slightly loss, and the price of products in the month follows the decline of raw materials.
Chapter 4 Polypropylene Upstream Market Analysis
4.1 Crude Oil Trend Analysis
The global economy is weak, the demand is expected to slow down, and the adjustment of the OPEC+ meeting schedule has triggered short-term bearish sentiment, and international crude oil prices have fallen this month. As of November 28, the WTI01 contract price was $76.41/barrel, and the Brent 01 contract price was $81.68/barrel. Compared to the beginning of the month, WTI fell by $4.61/barrel and Brent fell by $5.73/barrel.
4.2 Methanol Trend Analysis
Mainland market: This month, the methanol market showed a downward trend in the month, and the weakness of terminal demand is still the main factor dragging down the market trend. In addition, the price of raw coal fluctuated and fell, the support of the cost side weakened, and the price of the mainland market fluctuated and fell under the influence of bearish sentiment. At the beginning of the month, methanol spot-future is now fluctuating upward, and the futures market is rising strongly, coupled with the impact of the gas restriction policy in the southwest region in some areas of the mainland, the device has stopped operation or reduced the burden, to a certain extent, to boost the mentality of the industry, but considering the lack of follow-up of downstream demand, the market transaction has not seen a significant volume, and some manufacturers sell products to ensure shipments, but the overall shipments are still average. In the middle of the month, the methanol market continued to show a regional trend, the overall transaction atmosphere in the mainland market was mixed, some devices in Ningxia were shut down for maintenance, and the market was running at a high level under the support of little inventory pressure, but the market prices in other regions of the mainland were not strong enough to rise under the influence of weak demand, and the market transaction still maintained rigid demand. New order transaction was limited, and the market sentiment was mixed. After entering the end of the month, the market fell sharply under the influence of poor performance on the supply and cost side, and the quotation of some regional markets in the mainland fell below the 2,000 yuan mark. Under the influence of fear of falling, the downstream market replenishment enthusiasm is not high, and the overall transaction atmosphere of the market is light.
Port market: During the month, the port spot market quotation was adjusted with the market, the futures market remained low and fluctuated, the current import cargo still maintained a high position, and the port regional inventory increased compared with the previous period, and we also need to pay attention to the operation of downstream devices and the arrival of imported cargo at the later stage.
Chapter 5 Analysis of Polypropylene Import and Export
PP Total Volume Analysis: In October 2023, China's polypropylene imports were 347,300 tons, +2.96% month-on-month, and the cumulative import volume from January to October 2023 was 3.38 million tons, a decrease of 7.85% year-on-year.
China's polypropylene exports in October 2023 were 112,000 tons, -10.11% month-on-month, and the cumulative export volume from January to October 2023 was 1.0975 million tons, -5.20% year-on-year.
Figure 2 2021-2023 PP Monthly Import Volume Comparison Chart
Figure 3 2021-2023 PP Monthly Export Volume Comparison Chart
PP Importer Countries Analysis:
According to customs data, in October 2023, China imported 66,000 tons of PP from South Korea, accounting for 19.00% of the total imports; 62,400 tons from Singapore, accounting for 17.97% of the total imports; and 55,100 tons from the United Arab Emirates, accounting for 15.87% of the total imports.
Figure 4 Distribution of PP Import Source Countries in October 2023
Analysis of PP Exporting Countries:
According to customs data, in October 2023, China's domestic PP exported 19,500 tons to Vietnam, accounting for 17.41% of the total exports; 9,700 tons to Brazil, accounting for 8.66% of the total exports; and 8,400 tons to Bangladesh, accounting for 7.50% of the total exports.
Figure 5 Distribution of PP Exporting Countries in October 2023
Chapter 6 Polypropylene Trend Forecast
On the cost side: after the international oil price has experienced a short-term continuous decline, the deepening of production cuts in the later stage is still a high probability event, and the focus is on the OPEC+ meeting in the later stage, and the medium-term crude oil maintains a range-bound operation. In December, the temperature is still expected to drop, the demand for civil using electricity will increase, the daily consumption of downstream power plants will increase, and the process of coal inventory destocking will be accelerated; On the supply side, the supply side of the market expanded production intensively in December, and at the same time, there were not many new maintenances, and the pressure on PP supply continued to increase. On the demand side, it is difficult to increase new orders in major downstream industries and they even show a gradual slowdown trend, and the demand for raw materials is weakening. From the perspective of speculative demand, the current midstream inventory is still not high, and the short-term planning would choose whether to build warehouses according to the rise and fall of the market, which has a relatively limited impact on the medium-term market; On the inventory side: According to the inventory trend in previous years, in view of the current petrochemical’s grasp of market demand and effective planning of production arrangements, it is expected that these two kinds of oil inventories will continue to operate at a low level at the beginning of the month, and the role of supporting the market will continue to exert force. To sum up, it is expected that the domestic PP market will show a downward trend in December 2023, and we will pay attention to the realization of new production capacity.
