Stage-Specific Supply and Demand Mismatch Boosts Prices, Polypropylene (PP) Welcomes "New Year Red"

During the week, the number of temporary outages in polypropylene production facilities increased, leading to a significant reduction in supply. Demand, driven by essential needs and rising market conditions, showed relatively good performance due to phased purchasing. The widening supply-demand gap for polypropylene provides strong support for market prices. 。

Figure 1: Comparison of Polypropylene Price Changes for 2025-2026 (Unit: Yuan/Ton)

From the price performance perspective, the polypropylene market showed a clear upward trend after the holiday, with the national average price for yarn at 6,334 yuan/ton, an increase of 180 yuan/ton compared to before the holiday, representing a growth of 2.92%. 。 From a macro perspective, during the New Year's period, the United States launched military action against Venezuela, and the impact gradually intensified after the holiday, with market speculation and bullish sentiment rising, leading to consecutive price increases on the trading floor. From the PP fundamental perspective, on the supply side, the commissioning of new facilities has temporarily come to a halt, and given that current PDH facility profits remain low, the expectation of subsequent facility shutdowns for maintenance remains strong, which may lead to a temporary contraction in supply. On the demand side, during the price increase phase, downstream replenishment intentions have strengthened, the spot situation has improved, and the basis has strengthened, pushing market prices upward.

From the perspective of fundamental changes, this period has seen an increase in temporary shutdowns for maintenance. New additions include the shutdowns of the Lihesheng and Zhixin, as well as the first phase of Donghua Energy (Ningbo), leading to increased output losses and a decrease in production, which has alleviated supply pressure. On the demand side, although domestic demand remains relatively stable, the rise in export demand has resulted in little change in total demand. Therefore, this week the decrease in supply exceeded the drop in demand, improving the supply-demand imbalance and providing strong support for the market due to supply being less than demand.

Figure 2 Future Changes in China's Main Polypropylene Market for the Next Three Weeks (Yuan/Ton)

Overall, it is expected that the polypropylene market will mainly experience a strong fluctuation in the short term, digesting previous gains. Although the supply side has reduced due to an increase in temporary maintenance, the vast production capacity base is unlikely to fundamentally alter the market structure. On the demand side, future demand has been depleted by downstream advance purchases and there is a lack of follow-up on new orders, limiting the potential for further increases. The market is expected to enter a cautious phase of digesting raw materials. On the cost side, the support from oil-based and PDH-based costs has eased due to the cooling of Federal Reserve rate cut expectations and fluctuations in international oil prices. Overall, the market will operate mainly on the logic of digesting previous gains amidst the struggle between replenishing at absolutely low prices and subsequent weak transactions.