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Insight | Time: May 18 2022 4:19PM  Editor:Amber
Can PP rise in the near future?
 
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Recently, the international crude oil price breaks through the high level of $110/ barrel again, as if returning to March. On May 17, the Jun futures contract of WTI has closed at $112.40/ barrel, and the Jul futures contract of Brent has closed at $111.93/ barrel; on the other hand, PP, However, the glory of March has long been lost. In East China, mainstream traders offer for homo PP raffia at 8,600-8,680yuan/mt, a decline of nearly 200-250yuan/mt compared with late March.

 

It is not difficult to find that in this round of market, the impact of crude oil prices on the PP market is not as effective as it was in Mar. Obviously, when high costs become the norm, market participator鈥檚 attention to costs has also weakened, but the impact of demand has gradually increased. At present, PP spot market is in a stalemate, which is also because the downstream demand is lower than expected.

 

1. Cost & Profit:


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At present, the cost of each production process of PP is higher than the spot price of homo PP raffia, and the real-time cash flow reproduces a comprehensive loss phenomenon, among which the loss of oil-based PP is the most obvious. It has to be said that since 2021, the support from cost-side of PP is always strong, which is good for the spot price, and at least it is unlikely to have a significant plunge.

 

2. Supply:

China PP plants shut for maintenance in May
Company Capacity 锛圞TA锛 Operating rate loss Time Shutdown days in May Daily output锛坘t锛 Production loss(kt)
PetroChina Liaoyang PC 50 100% long-term 31 0.2 4.7
PetroChina Dalian PC(old plant) 50 100% long-term 31 0.2 4.7
Changzhou Fund 300 100% 2017.7.1-/ 31 0.9 27.9
Sinopec Wuhan PC 105 100% 2021.11.12-/ 31 0.3 9.8
Haiguolongyou #1 200 100% 2022.2.1-/ 31 0.6 18.6
Hebei Haiwei 300 100% 2022.3.1-/ 31 0.9 27
Sinopec Yangzi PC (YPC) #B 100 100% 2022.3.14-2022.5.26 26 0.3 9
FREP 120 100% 2022.3.15-2022.5.8 8 0.4 10.8
Qingdao Jineng Technology I 450 100% 2022.3.15-2022.5.14 14 1.4 40.5
Sinopec Yangzi PC (YPC) #2 200 100% 2022.3.15-2022.5.17 17 0.6 10.2
Sinopec Hainan Refinery 200 100% 2022.3.16-2022.6.1 31 0.6 18
CSPC II 400 90% 2022.3.24-2022.5.9 9 1.1 32.4
Sinopec Yangzi PC (YPC) #A 100 100% 2022.3.25-2022.5.17 17 0.3 5.1
Hebei Lihe Zhixin I 300 100% 2022.4.3-2022.5.6 6 0.9 5.4
Haiguolongyou #2 350 100% 2022.4.3-2022.5.14 14 1.1 14.7
PetroChina Dagang PC 100 100% 2022.4.8-2022.5.20 20 0.3 6
PetroChina Daqing Refining & Chemical 300 75% 2022.4.18-2022.6.4 31 0.7 20.9
Zhejiang Petroleum & Chemical  #1 450 100% 2022.4.25-2022.6.9 31 1.4 41.9
Sinopec Maoming PC #1 170 100% 2022.4.28-2022.6.14 31 0.5 15.8
PetroChina Fushun PC 90 100% 2022.5.1-2022.5.31 31 0.3 8.4
Zhejiang Petroleum & Chemical  #2 450 100% 2022.5.2-2022.6.15 31 1.4 41.9
Fujian Gulei Petrochemical 350 80% 2022.5.6-2022.5.9 4 0.8 3.4
Sinopec-SK (Wuhan) PC #3 300 100% 2022.5.6-2022.5.15 10 0.9 9
PetroChina Dushanzi PC 70 100% 2022.5.6-2022.5.11 6 0.2 1.3
Sinopec Qilu Petrochemical 70 100% 2022.5.6-2022.5.29 24 0.2 5
Sinopec Yanshan PC #3 300 100% 2022.5.7-2022.5.12 6 0.9 5.4
Xuzhou Haitian 200 100% 2022.5.11-/ 21 0.6 12.6
PetroChina Lanzhou PC 300 100% 2022.5.11-2022.5.13 3 0.9 2.7
Qinghai Yanhu 160 50% 2022.5.12-/ 20 0.2 4.8
Total 417.9


In May, there are still many PP plants shut for maintenance in China. According to statistics from CCFGroup, as of May 17, the output lost by PP due to plant turnaround in May is about 418,000 tons. In addition, the output lost due to the reduction of some plants, the total loss is expected to reach about 560,000 tons. On the other hand, the current price spread between RMB market and PP CFR China market is large, and the export arbitrage window is open, which can also alleviate a certain supply pressure in China. Moreover, there is no news that new plants will be put into operation in May, so the supply situation in May is also bullish for the market.

 

3. Downstream

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Finally, as for the downstream, affected by the epidemic, logistics and transportation in East China have been hindered, and downstream demand has also been restricted to a certain extent. Taking BOPP as an example, the orders of BOPP film plants have remained relatively stable without too much fluctuation. Due to the continued profitability, the run rate of BOPP film plants has also remained high (except for maintenance factors). However, judging from the narrowing of BOPP cash flow, the downstream demand of the BOPP plant is not as good as expected. BOPP film plants鈥 demand for feedstock PP is mediocre, and most of them purchase according to the actual orders.

 

In general, the current PP market is in a stalemate as the weak downstream demand is suppressing the benefits brought by high costs and plant maintenance. As for the future, the market may rise, which mainly depends on the recovery of downstream demand.


[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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