PP granule market appeared weak recently

In the past week, propylene price moved higher so sharply, from 6600 yuan/mt at the beginning of 2020 to the current 6900-6950yuan/mt, basically rising 50yuan/mt a day. Reasons were as follows: 1. A number of PDH plants (such as Tianjin Bohua, Shaoxing Sanyuan, Hebei Haiwei and etc.) closed, and propylene supply decreased; 2. Downstream profits were good in the earlier stage, plants were running at high operating rate and demand was good; 3. International crude oil rose up continuously on account of the geopolitical tensions; and so on. As for PP powder, the increase in the propylene price meant the increase in production costs. As can be seen from the picture above, the current theoretical cash flow of powder enterprises was about -50-(-) 150yuan/mt.

PP granule market appeared weak recently, and was even worse than PP powder. PP powder was even 50yuan/mt higher than PP granule, which was extremely bad for powder trading, especially near the end of the year when the downstream procurement was concentrated. However, considering the above costs, there was no basis for price reduction of PP powder.

To put it simply, PP powder is currently in a dilemma, and there is no way out. Whether to guarantee cost or guarantee sales, it’s ultimately depends on the plants, which is unknown at present. In any case, if the overall environment is difficult to change, the market would be weak and it is possible for some plants to take a holiday ahead of time.