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Insight | Time: Oct 20 2020 3:11PM
Can PP powder rise in the late market?
 
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After the National Day holiday, PP powder market is relatively stable compares with the PP granule market. On Oct 19, mainstream offers are at 7,900-8,000yuan/mt in Shandong province, and 7,950-8,100yuan/mt in East China..



So, can PP powder rise in the late market?

First, support from the cost side



At present, the cash flow of powder plants has not yet achieved a positive value (the processing cost is 600yuan/mt, excluding propylene transportation cost), and the loss is about 100-150yuan/mt. Thus it can be seen that the cost pressure of powder plants is still quite heavy. Similarly, under the high cost, the ex-works price of powder plants moves higher.

Second, inventory pressure is relatively low



  Inventory before the holiday(days) Inventory after the holiday(days) Change
2019 1.64 2.14 0.50(30.49%)
2020 1.19 1.8 0.61(51.26%)


From the perspective of inventory changes, the volume and extent of increase this year is higher than that of 2019, but in terms of overall volume, inventory after the holiday this year is lower than that of last year. On the one hand, the operating rate of powder plants in Shandong is generally low; and on the other hand, the enterprises start sales ahead of time during the holidays. For most powder plants, short-term inventory is pressure-free.

Third, the price spread between PP granule and PP powder widens



Thanks to the rise of PP granule market after the festival, the price spread between PP powder and granule market improves, which has expanded from 50yuan/mt to 230yuan/mt. Although it has not reached the ideal state, it has alleviated the embarrassing situation of PP powder. Also, it gives PP powder some room to rise.

In the short term, seeing from the market fundamentals, PP powder market is still profitable. Under current circumstances, PP powder price may fluctuate higher in the late market, and traders are suggested to pay attention to the price of propylene and the price spread between PP granule and PP powder market.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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