In the past two years, domestic
polypropylene production capacity has been at a peak, especially coal-to-olefins and large-capacity equipment in joint ventures. The total production capacity of polypropylene in the northwest, east China and south China regions is expected to reach 5 million tons next year. After the New Year's Day, due to the combined effect of the holiday accumulation and the downstream willingness to receive goods lower than expected, the PP1705 contract will be adjusted. Before the Spring Festival, the accumulated pool may still continue, and the PP price trend will still be weak.
Supply remains high
The recent supply of PP mainly depends on the amount of domestic memory and imports. From the perspective of national memory, as of January 4, the PP device maintenance rate was only 11.74%, including 4 sets of devices for long-term parking, so the device operating rate was over 90%. Considering that there are more installations and maintenance this year, the probability of more overhauls before the Spring Festival is very small, so the high-level operating rate will continue to be maintained. From the point of view of imports, due to the profit of imports in December last year, it is expected to stimulate the recovery of imports in January this year.
In addition, from the seasonal perspective, the import volume in January was at a seasonal high, and the import of imported goods from the previous period was also concentrated in January and February. Overall, the domestic PP spot supply pressure is relatively large before and after the Spring Festival, which makes the middle and lower reaches of the market outlook pessimistic, post-inventory behavior delayed.
Just need a trend to decline
PP demand mainly depends on the need and replenishment needs. From the point of view of the need, the Spring Festival this year is advanced to the end of January, while the downstream of PP is mainly for small and medium-sized enterprises. The operating rate before and after the Spring Festival has a downward process. By then, the operating rate of the woven device will fall back to 50% from the current 70% probability. %, and the current profit of styling is not good, and the number of enterprises that have been on holiday early has also increased, which has intensified the need for the fall before the Spring Festival.
Judging from the demand for replenishment, although the trend of continuous decline before and after the Spring Festival will not change much, but due to the current low inventory of middle and lower reaches, replenishment demand still exists, but stocking before the holiday will be more cautious.
Considering that the time span of the mid-and-downstream demand season in March this year is greater than that of previous years, this allows middle and downstream enterprises to have enough time to stock up and replenish stocks after the Spring Festival. And the current spot price is high, and the market pessimism around the Spring Festival is still there, which has increased the probability of delays in stocking of middle and downstream enterprises. Therefore, from a rational point of view, a small amount of stocking or restocking before the Spring Festival is difficult to form an effective support for PP prices.
Short-term focus on powder alternative support
Before and after the Spring Festival, the supply pressure of PP will continue to increase, and just need to have a fallback process. If the demand for replenishment in the middle and lower reaches is expected to be postponed until the release of the year, then the probability of PP before the Spring Festival will continue to fall; and if the demand for replenishment is released before the holiday, , then overdraft demand after the holiday, will also increase the pressure after the holiday. Therefore, no matter what happens, the upward pressure will continue to exist, but the rhythm will change.
The short-term PP1705 contract continued to fall back to around 8,500 yuan / ton, the price of PP pellets in the low end of East China also fell to around 8,550 yuan / ton, while the price of propylene monomer in Shandong on January 4 was 7,850-7,950 yuan / ton, maintaining relatively strong status. The processing fee is usually 500-600 yuan / ton, the corresponding powder cost is 8450-8550 yuan / ton, short-term disk and spot will test the support of powder extrusion effect. However, in the medium and long term, as the pressure on refinery stocks continued to rise, and the prices of downstream products all fell, the price pressure continued to rise, making the alternative support for powders gradually move down. Therefore, in the medium and long term, the alternative support of powder is difficult to sustain and can only be confirmed as short-term support.
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