Returning from the Spring Festival holiday in 2022, PP futures and spot market shows a "V" trend, and the inflection point occurs at the time of the conflict between Russia and Ukraine.
Since late February, the conflict between Russia and Ukraine has escalated to military action, international crude oil has continued to soar. On Mar 3, WTI futures rises to $114/barrel, a new high since October 2018, and Brent crude oil rises to $117/barrel, the highest level since June 2012.
Driven by the surge in crude oil, China domestic commodities generally soar. Currently, the PP May futures contract breaks a new high for the year, and spot price also rises. On Mar 3, mainstream traders offer for homo PP raffia at 8,850-8,950yuan/mt in East China.
Although PP spot price rises, from the perspective of market transactions, there is obvious resistance to the increase in spot price, downstream is reluctant to purchase high-price materials and hedgers procures for arbitrage.
However, from the perspective of cost, PP spot price is obviously underestimated. At present, the theoretical benefits of each production process are not very good, with a general loss of 1000-1500yuan/mt (without considering the reserve of raw materials and other factors). Although it is acceptable for the profit to be compressed as the production capacity of new China domestic plants continues to be released and the market competition intensifies, the current situation is somewhat beyond expectations. In the long run, if the price of raw materials continues to remain high, the cost pressure of production enterprises will gradually be emerged.
News on raw materials:
1) Saudi Aramco has announced CP in March: propane at $895/mt, up $120/mt from the previous month; butane $920/mt, up $145/mt from the previous month.
2) On Mar 3, mainstream price of propylene in Shandong have risen to 9000yuan/mt.
3) On March 2, the daily price naphtha-CFR closed at $1055.6/mt; at noon on March 3rd, the April MOPJ of naphtha is estimated at around $1045mt CFR.
Plant operation |
company |
location |
Capacity 锛圞TA锛 |
Shutdown |
Restarted |
Note |
Changzhou Fund |
Changzhou |
300 |
2017.7.1 |
/ |
shutdown |
Shandong Yuhuang |
Shandong |
100 |
2017.7.18 |
/ |
shutdown |
Sinopec Wuhan PC |
Wuhan |
105 |
2021.11.12 |
/ |
shutdown |
Haiguolongyou #1 |
Daqing |
200 |
2022.2.1 |
/ |
shutdown |
Zhongjing PC |
Fuzhou |
350 |
2022.2.13 |
/ |
shutdown |
Zhongan Lianhe |
Anhui |
350 |
2022.2.14 |
/ |
shutdown |
Zhongjiang PC |
Fuzhou |
350 |
2022.2.27 |
/ |
shutdown |
Zhejiang Petroleum & Chemical II #1 |
Zhoushan |
450 |
2022.3.1 |
2022.3.5 |
shutdown |
Shandong Shenda #1 |
Tengzhou |
200 |
2022.3.1 |
2022.3.15 |
shutdown |
Shandong Shenda #2 |
Tengzhou |
80 |
2022.3.1 |
2022.3.15 |
shutdown |
Hebei Haiwei |
Hengshui |
300 |
2022.3.1 |
2022.3.21 |
shutdown |
Sinopec Qilu Petrochemical |
Zibo |
70 |
2022.3.2 |
2022.3.30 |
shutdown |
Xuzhou Haitian |
Xuzhou |
200 |
2022.3.3 |
2022.3.14 |
shutdown |
Qinghai Yanhu |
Yanhu |
160 |
2022.2.19 |
2022.3.3 |
Restarted |
Sinopec Yangzi PC (YPC) #2 |
Nanjing |
200 |
2022.3.15 |
2022.5.9 |
Scheduled Maintenance |
Sinopec Hainan Refinery |
Danzhou |
200 |
2022.3.15 |
2022.5.11 |
Scheduled Maintenance |
PetroChina Dalian PC |
Dalian |
200 |
2022.3.18 |
2022.3.29 |
Scheduled Maintenance |
Sinopec Sabic Tianjin (SSTPC) |
Tianjin |
450 |
2022.3.20 |
2022.3.31 |
Scheduled Maintenance |
Sinopec Yangzi PC (YPC) #A |
Nanjing |
100 |
2022.3.21 |
2022.4.30 |
Scheduled Maintenance |
Sinopec Yangzi PC (YPC) #B |
Nanjing |
100 |
2022.3.21 |
2022.5.28 |
Scheduled Maintenance |
Under the pressure of high cost, some enterprises have reduced their operating rate and shut their plants. For example, Dongming Hengchang Chemical is now operated at 50% due to cost problems, and Xuzhou Haitian shut its PP plant on account of cost problems. In addition to planned maintenance and temporary failures, the reduction on operating rate or shutdowns due to cost factors are expected to increase. In addition, the startup of new plants may also be delayed.
At present, the increase of domestic chemical products is far less than that of international crude oil. If the conflict between Russia and Ukraine cannot be properly resolved, crude oil prices are expected to remain high, and PP futures and spot price may continue to rise. As for the growth rate, downstream demand and actual procurement needs to be considered. .