A Brief Analysis of the Factors Affecting the PP Market in East China in the Later Period

1、 Trend review

In August, the PP market price in East China was stable and slightly higher, and the transaction continued to be flat. Sinopec and PetroChina have set off a wave of price increases, which has played a certain role in driving the market. In addition, the overall resources in the market are not sufficient. Most traders maintain a good mentality, mainly following a small price increase. However, due to weak terminal demand, and the downstream factories are afraid of receiving goods, the overall trading has always been in a bad state.

2、 Future market forecast

Upstream market: international crude oil. OPEC will hold a meeting in Algiers, the capital of Algeria, from September 26-28. There are many rumors that the member states will reach a frozen production agreement at this meeting. This time, Russia will also join the frozen production to prevent the further decline of oil prices. However, the opposition is still worried because the oil production of the major oil producing countries has quietly soared to new highs. For propylene monomer, some units in China are closed, and the supply of monomer in the market is reduced, or provide some support for short-term prices.

Market supply: The G20 Summit in Hangzhou, China in 2016 is coming. In order to ensure the air quality during the meeting, Zhejiang has introduced the environmental protection plan for building the "West Lake Blue" action, which divides the polluting enterprises in the area by region and level, and takes measures such as stopping production and limiting production respectively. At that time, many sets of PP petrochemical plants will be involved. According to cutting-edge news, Shaoxing Sanyuan and Ningbo Formosa Plastics plan to stop for maintenance at the end of August and the middle of September. The first line and second line of Shanghai Petrochemical may start in turn. Zhenhai Refining and Chemical Co., Ltd. is initially determined to reduce the load, while Yangzi Petrochemical Co., Ltd., Ningbo Fude Petrochemical Co., Ltd. and Donghua Yangzijiang Petrochemical Co., Ltd. are waiting to be finalized. This policy may provide support for the short-term supply of the market.

In terms of petrochemical industry: petrochemical enterprises have little inventory pressure, and the release of goods has decreased continuously near the end of the month. The situation of tight on-site supply may continue, and the intention of price fixing will not change or will form a strong support for spot goods.

Downstream industry: As a sensitive area of environmental protection, the plastic industry is naturally concerned at this special moment. It is reported that most of the enterprises that stopped working during the G20 control period were concentrated in highly polluting products enterprises. Although plastic products enterprises involved many enterprises, including woven bags, BOPP, daily necessities, wires and cables and some blow molding enterprises, most of them did not produce much pollution in the production process, so they basically ordered to reduce production burden. One daily necessities enterprise said that they did receive relevant notices. However, due to the recent downturn in the plastic industry, their original operating rate was only 70-80%, so reducing to 50-60% would not have much impact.

To sum up, the downstream factories have been weak in receiving goods, but now they will face the control of the G20 Summit, and the persistent disease of weak demand will continue to hinder the development of the market. However, supported by the firm quotation of petrochemical enterprises and low social inventory, it is unlikely that the market will decline in the future. It is expected that in the near future, the PP market in East China may be a stable market with small adjustment.