2026 First-Half Polypropylene Market Review And Trend Outlook

Introduction:In the first half of 2026, the phase of tight polypropylene supply was broken by the fading of geopolitical sentiment toward the end of the second quarter, as previously shut-down units resumed operations in a concentrated manner and additional market supply gradually emerged. After prices surged on the back of geopolitical speculation and tight spot availability, downstream end users found it difficult to sustain purchases at elevated raw material prices and continued to cut procurement. The dominant logic of the polypropylene market thus shifted from tight supply to weak demand, and the market subsequently entered a sharp downward correction.

1. Spot Price and Futures-Spot Spread Trends of Polypropylene

In January, the market stopped falling and rebounded on news of a cold wave in the United States, as speculative sentiment heated up again. Meanwhile, inventory pressure at production enterprises remained manageable and spot support was still in place, allowing polypropylene prices to continue their rebound trend. February spanned the Lunar New Year holiday, and market performance was significantly influenced by macro sentiment and futures fluctuations. As risk aversion rose ahead of the holiday, trading activity was weak, and combined with profit-taking in futures funds, the market experienced a phased pullback. From March to April, the domestic polypropylene market was dominated by geopolitical tensions in the Middle East, showing a roller-coaster pattern of sharp rises and falls, with prices fluctuating between RMB 6,700 and RMB 10,000 per ton. In the second half of April, as the situation between the United States and Iran repeatedly shifted, the market gradually became desensitized to geopolitical events, emotional impacts faded, and the market returned to fundamentals. In May, crude oil strengthened on geopolitical support, driving prices higher again. By the end of the month, expectations for a ceasefire agreement between the United States and Iran increased, and the expected resumption of shipping through the Strait materialized, causing the geopolitical risk premium to disappear and oil prices to drop sharply. Polypropylene futures and spot prices fell in tandem. At the beginning of June, the U.S.-Iran talks stalled, geopolitical risk premiums in the Middle East rose, and crude oil climbed on safe-haven inflows, providing bottom support for PP futures and spot prices from a sentiment perspective. However, near the end of the month, the market turned sharply lower as the United States and Iran reached a framework consensus in talks and issued a joint statement. Safe-haven sentiment quickly dissipated, crude oil corrected sharply, and upstream raw materials such as crude oil, propane, and propylene weakened across the board, with collapsing costs becoming the core driver of the price plunge.

Falling feedstock prices have enabled previously rate-cut and idled units to restart, and domestic supply is expected to increase significantly in July. Meanwhile, downstream demand is in the off-season and operating rates remain low, leaving supply and demand fundamentals without support. Amid the combined pressure of multiple bearish factors, weekly price data show that as of the 26th, the national average price of raffia grade stood at RMB 7,916/ton, down RMB 1,285/ton week on week and RMB 1,745/ton from the beginning of the month, a decline of 22.04%.

From January to June 2026, the polypropylene basis range is expected to be between -267 to +705 yuan/ton. In the first half of 2026, polypropylene will form an extreme positive basis, primarily driven by a significant divergence between the pricing logic in the futures market and the short-term tightness in the spot market. From the futures perspective, funds consistently price in long-term easing expectations in advance, suppressing the upward potential of contracts. On a macro level, the market remains skeptical about the sustainability of domestic consumption recovery throughout the year, leading to a cautious stance among bullish funds, with futures rising far slower than spot prices. When geopolitical factors push up crude oil, driving costs higher, futures preemptively discount the positive effects of rising oil prices and do not continue to rise in sync with the spot market.

Expectations of future supply are the core factor weighing on futures. The futures market has continued to price in advance the incremental pressure from the restart of units under maintenance in the second half of the year and the commissioning of new refining and chemical capacity, leaving long-term funds reluctant to chase prices significantly higher. In contrast, spot prices have continued to strengthen on support from short-term unit maintenance and phased rigid demand, rapidly widening the futures-spot spread to around RMB 1,000. Toward the end of the second quarter, a pullback in crude oil combined with weakening end-user demand led to a rapid decline in spot prices. Since futures had posted only limited gains earlier, their decline was more moderate. As a result, the previously sharply widened spot premium basis narrowed quickly, fully demonstrating the role of forward pricing in futures in hedging short-term spot price volatility.

II. Changes in Polypropylene Supply in the First Half of the Year

Figure 4 Monthly Polypropylene Output and Capacity Utilization Trend (10,000 tons, %)		Figure 5 Monthly Production Trends Comparison of Major Polypropylene Varieties (10,000 tons)
Data source: Longzhong Information		Source: Longzhong Information

In the first half of 2026, the polypropylene industry experienced a sharp downturn in operating rates, with both output and capacity utilization plunging dramatically, in stark contrast to the high operating rates seen throughout 2025. At the beginning of the year, a number of major domestic units underwent annual maintenance, and capacity utilization fell to a low of 63%, while monthly output also hit a phased low, leading to a substantial contraction in spot market supply. In addition, ongoing geopolitical conflicts in the Middle East continued to disrupt international crude oil markets, driving raw material costs sharply higher. Some refining and chemical companies proactively cut operating rates to avoid losses, further suppressing overall industry output, intensifying spot shortages, and supporting the market with spot premiums of more than RMB 1,000 per ton.

In the latter part of the second quarter, units that had been under maintenance gradually resumed production, and capacity utilization recovered slightly to around 65%, though it remained well below the above-77% high seen in 2025. Subsequently, crude oil prices rose and then pulled back, easing cost pressures somewhat. However, the lingering effects of short-term supply contraction remained. This supply-demand pattern was also the core industry and cost support behind the fact that spot prices performed significantly stronger than futures in the first half of the year, with the spot-futures basis widening markedly.

Figure 6 Monthly Variation Comparison of Capacity Utilization Rate of Polypropylene Raw Material Sources (%)		Figure 7 Monthly Variation Comparison of Capacity Utilization Rate by Enterprise Type for Polypropylene (%)
Source: Longzhong Information		Data source: Longzhong Information

2In the first half of 2026, operating rates in the polypropylene industry declined sharply overall, with clear divergence across different feedstock routes and enterprise types. Affected by rising crude oil and propane costs driven by geopolitical conflicts in the Middle East, oil-based, PDH-based, externally procured propylene-based, and methanol-based producers came under pressure from higher feedstock costs, leading to more voluntary load reductions and shutdowns and a sharp decline in operating rates. Only coal-based producers, supported by the advantage of self-owned feedstock, maintained operating rates above 90% for an extended period, demonstrating outstanding risk resistance. By enterprise type, Sinopec’s concentrated maintenance of units in 2026 caused its capacity utilization rate to plunge to around 50%, dragging down the industry average. PetroChina showed relatively stronger operating resilience, while local small and medium-sized enterprises also saw their operating loads decline. The simultaneous load reductions across multiple production routes and market participants led to an overall contraction in industry supply and a tightening of spot availability, which also served as an important industrial support for spot prices outperforming futures and for the significant widening of the spot-futures basis in the first half of the year.

III. Changes in Polypropylene Consumption in the First Half of the Year

Figure 8 Average Operating Rate Trend of Downstream Polypropylene in 2025-2026 (%)		Figure 9 Monthly Consumption Trend of Polypropylene in 2025-2026 (10,000 tons)
Data source: Longzhong Information		Source: Longzhong Information

In the first half of 2026, polypropylene consumption showed a trend of rising initially, then falling rapidly, followed by a gradual recovery. At the start of the year, downstream resumption of work drove demand, and the market still maintained a certain level of consumption in January and February. After the Spring Festival, end-user orders failed to follow up sufficiently, and demand weakened rapidly in March and April. Consumption fell to a periodic low of 2.3855 million tonnes in April, while the downstream operating rate simultaneously declined to an annual low of 39.14%.

The main reason lies in weak domestic and external demand for finished products. Traditional sectors such as plastic weaving and injection molding have insufficient orders, while high raw material prices have dampened companies’ willingness to restock. Factories have maintained low raw material inventories and produced on demand. Demand recovered slightly in May and June, but the pace of downstream operating rate recovery was slow, and overall consumption remained significantly below the levels seen in the same period of 2024 and 2025. Overall demand was under pressure in the first half of the year.

Data from the National Bureau of Statistics show that in May 2026, China’s output of plastic products was 6.077 million tonnes, down 3% year on year. From January to May, China’s cumulative output of plastic products reached 30.877 million tonnes, up 0.6% cumulatively.

IV. Changes in Polypropylene Supply-Demand Balance in the First Half of the Year

Figure 11 Monthly Supply and Demand Difference Chart for Polypropylene (10,000 tons, Yuan/ton)		Figure 12 Survey of Views on the Polypropylene Market (%; inner ring: June, outer ring: July)
Data source: Longzhong Information		Data source: Longzhong Information

In the first half of 2026, the supply and demand for polypropylene expanded and then narrowed. A brief supply gap occurred in February, followed by a persistent oversupply from March to May, peaking in April at the highest level of the year. Geopolitical disturbances drove up crude oil prices, increasing market speculation, and prices surged to a peak. By June, the oversupply began to decrease, but the supply-demand situation remained relatively loose, with previously high prices gradually declining and fundamental pressures continuing to manifest.

According to the sentiment survey data, market expectations have weakened significantly. In June, participant sentiment was relatively balanced, with 22% bullish, 36% bearish, and 42% neutral, indicating that a wait-and-see attitude dominated the market. Entering July, bearish sentiment intensified sharply, with the proportion of bearish participants surging to 71%, while the bullish share dropped to just 1% and the neutral share fell back to 28%. As the traditional off-season pressure emerges in the second half of the year, concerns over ample supply and weak demand continue to grow. Most participants are pessimistic about the market outlook and are adopting a more cautious approach in their operations, reflecting a clear decline in overall market confidence.

V. Polypropylene Supply-Demand Balance and Price Forecast for the Second Half of the Year

Figure 132026Inventory and Price Correlation Chart of Polypropylene Producers (10,000 tons, yuan/ton)		Figure 14. Forecast of China’s Monthly Polypropylene Price and Supply-Demand Gap in 2026 (yuan/ton, right axis: 10,000 tons)
Data source: Longzhong Information		Source: Longzhong Information

In the second half of the year, the polypropylene supply-demand balance is expected to continue recovering from negative territory, with surplus pressure gradually emerging. From July to September, the supply-demand gap is projected to rise, and the loose supply pattern will persist. Coupled with the industry’s transition from the off-season to the peak season, downstream purchasing power is likely to recover only slowly, and the market is expected to remain largely rangebound while seeking a bottom. In the fourth quarter, the supply-demand gap is expected to widen further, intensifying the oversupply situation. Meanwhile, pressure from new capacity additions in the second half of the year will be significant, and expectations of future supply growth will continue to weigh on market sentiment. Although downstream demand may improve during the traditional peak season, the continuous release of new supply will keep offsetting demand growth, making it difficult to reverse the loose supply pattern. Overall, polypropylene prices are expected to remain under pressure in the second half of the year. While there may be some opportunities for modest, phased rebounds during the peak season, upside potential will be limited, and the market is unlikely to replicate the sharp rally seen in the first half. Mainstream prices for polypropylene raffia grade are expected to range between RMB 7,200 and 8,500 per tonne in the second half of the year.