November 28, 2022
PP market is relatively negative in the second half of 2022. According to the data monitoring of SunSirs, the price of domestic PP wire drawing materials was 8,608.33 RMB/ ton on July 1, which is also the highest point in the second half of 2022. Since then, the price has fluctuated and fell. By November 22, it had fallen below the 8,000 RMB/ ton mark. The price was 7,883.33 RMB/ ton, a half year decline of 8.42%, 5.31% lower than the price in the same period last year.
Macro aspect: the Federal Reserve's interest rate increase, the weakening of international crude oil and other multiple factors have deepened the pattern of high inflation in the global economy. The macro negative economic environment has long weighed on the PP industry chain.
In terms of raw materials: as the dollar index hit a high level and the economic recession put pressure on bulk products, the international crude oil at the far upstream of PP fell in the second half of the year, and the support for the cost end of oil based PP gradually weakened. In terms of propylene, propylene has declined since July due to the weakness of the downstream industrial chain. Since September, the market has slightly recovered. The current price position is about 7230 RMB/ ton, which is still a certain decline compared with the mid year position. In the second half of the year, the polypropylene raw material side generally supported the PP cost side weakly.
Supply: China's PP industry has expanded rapidly in recent years. Since 2018, the average annual capacity growth rate in China has been 10.27%. As of October this year, 2.8 million tons of new production has been put into production, and the total PP production capacity has reached 34.87 million tons. In the long run, the supply is expected to remain loose. In the second half of 2022, the average monthly unit load of the industry is 78.05%, and the average monthly output is stable at about 557,300 tons. In terms of inventory, except for rapid inventory removal during the peak consumption season of "Jinjiu", the inventory in other months is mainly accumulated, and the effect of inventory removal this month is fair. In the second half of the year, the supply side was under great pressure, which dragged down the spot price.
Demand: In the second half of 2022, the PP terminal factory will generally maintain production in terms of goods, and the weak and strong need to follow up. Although the demand in the peak season of September this year arrived as expected, the horizontal comparison of consumption over the years was slightly inferior. The confidence of downstream operators is not strong, and the stocking operation is cautious and conservative. The inventory level of downstream plastic knitting enterprises and BOPP enterprises, the main force of wire drawing materials, is gradually declining.
The load of non-woven fabric enterprises downstream of fiber material and melt blown PP was stable at more than 45% within half a year, the digestion speed of end products was stable, and the profit of enterprises fluctuated in a narrow range. In the second half of the year, the situation of international health events in various countries is still not optimistic, and the epidemic situation in China and neighboring countries has rebounded recently. However, it has limited pulling effect on medical melt blown fabric materials and strong market competition. The market of fiber materials and melt blown materials is consistent with the overall market of polypropylene.
In the second half of 2022, the macro inflationary economic environment will not change, and the profits of petrochemical enterprises will shrink due to its impact. As a whole, the upstream raw materials have weakened their support for PP. In the past six months, most of the market prices have been guided by the fundamentals of the supply and demand game. At present, the PP industry chain is full of empty space, and the mentality of practitioners is not strong. Downstream activities tend to be conservative, and the market momentum is average. It is expected that the PP price will fluctuate in a narrow range in China in the short term, mainly for consolidation and operation.