HEBEI WEAVER TEXTILE CO., LTD.

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Is the rising PP short-lived?

Sep is the traditional peak season of PP, however, PP market is not as good as expected. In early Sep, PP futures continues to rise, and uplifts the spot market. Then, with the approaching of the Mid-Autumn festival, spot prices move up, with an overall increase of nearly 300yuan/mt. Compared with PP market in July and Aug, which continues to fluctuate around 8,000yuan/mt, it is undoubtedly a good start. However, after the holiday, PP futures weakens again, and spot price falls. Spot market is relatively strong compared with the PP futures, and spot-futures basis strengthens.

Why spot market keeps firm, it is mainly due to the reduction in supply (the reduction in supply here mainly refers to the reduction in homo PP raffia).

 

Throughout the whole year, plants shut for maintenance intensively in Aug, with the largest production losses. In September, with the restart of the plants and the startup of the new plant of CNOOC Ningbo Daxie petrochemica, the overall supply increases month-on-month, but judging from the production ratio of homo PP raffia, it has not changed much.

As can be seen from the above chart, the production ratio of homo PP raffia has fluctuated around 25% for a long time from August to September, not exceeding 30%, and has approached 20% recently. The low production ratio directly determines the shortage of goods in circulation in the market, which can also explain why the spot price has not fallen as much as futures since the mid-Sep, as supply is limited, and upstream petrochemicals and traders keep their price firm and they are reluctance to sell at lows.

 

So, is there still a chance for PP market to rise? The answer may be yes. After all, it is in the traditional peak demand season of PP, and the expectation of better demand still exists. In addition, the National Day holiday is coming, traders stocks up for the holiday while supply of raffia is relatively tight, there is still a high probability of rising. Currently, the market is still in the game of increasing supply and rising demand.


Post time: Sep-30-2022