Polypropylene falls for 47 consecutive days with a 6% drop! can it turn the tide in the fourth quarter?

Introduction: According to tracking data from Longzhong Information, polypropylene entered a downward trend at the end of July, experiencing a decline for 47 consecutive working days, with a drop of 6%. During this period, polypropylene exhibited a pattern of strong futures and weak spot prices, with low market willingness to hold inventory and selling pressure causing the basis to weaken. How will the supply and demand dynamics for polypropylene perform in the future? Can the market turn around despite the headwinds?

I. Positive support from the supply side is evident; pay attention to the operation of PDH units in the fourth quarter.

On October 10, 2025, the Ministry of Transport announced the collection of special port fees for American vessels. The announcement states that, starting from October 14, 2025, special port fees will be charged for vessels owned by enterprises, other organizations, and individuals from the United States; vessels operated by enterprises, other organizations, and individuals from the United States; vessels owned or operated by enterprises or organizations in which enterprises, other organizations, and individuals from the United States directly or indirectly hold 25% or more of the voting rights or board seats; vessels flying the American flag; and vessels built in the United States. The maritime management authorities at the port where the vessels are docked will be responsible for collecting these special port fees.

From the perspective of polypropylene, apart from coal-to-chemical companies that have self-sufficient raw materials, other types of enterprises are affected to varying degrees. Among them, PDH units, due to their high reliance on imports from the U.S., may be directly impacted by the implementation of this policy. According to Longzhong Information statistics, there are currently a total of 9.9 million tons/year of PDH-based PP production capacity in China, accounting for about 20% of the total polypropylene supply. Currently, PDH operating load remains stable at around 70%. After the policy is implemented, as PDH companies deplete their raw material inventory, there will be significant pressure for subsequent raw material replenishment, and the operating rate of PDH units is expected to decline to around 50%. The future stability of PDH units will become an important variable for the polypropylene supply side.

Under the stimulation of low prices, downstream buying of polypropylene is activated, and major downstream sectors have entered a profitable zone.

From the perspective of downstream performance, due to the continuous decline in polypropylene raw material prices in the earlier period, the market's willingness to hold inventory has remained low, and the raw material inventory days in downstream industries have dropped to the lowest point in three years. As of the latest statistics on October 9, the raw material inventory days in the polypropylene downstream industry are only 9.72 days, which is 15% lower year-on-year. In terms of average profit performance in downstream industries, as the product prices fluctuate less than the PP raw material side, the recent average profit in downstream industries has generally increased, with average profit per ton exceeding 500 yuan/ton. High profits are stimulating the operating enthusiasm of downstream sectors, and the demand for polypropylene downstream is expected to enter a positive feedback loop.

3. Export Promotion of Polypropylene Raw Material Consumption: The export growth expectation for the fourth quarter remains at 30%.

According to customs data, the cumulative export volume of polypropylene from January to August 2025 reached 2.1035 million tons, an increase of 29.03% year-on-year.Looking ahead, production enterprises have a good grasp of export rhythm for the year. As the fourth quarter approaches, the market is entering a closing phase, and some enterprises have set annual strategic goals to increase export volume by 100%. Therefore, in the fourth quarter, some enterprises are expected to continue offering discounts to maintain export growth, making exports an important means to expand domestic demand.

4. Improvement in the Fundamentals of Polypropylene: Strengthening of the Spot Basis

After the National Day holiday, propane costs collapsed, and the polypropylene market was hit again. However, under the stimulus of low prices, downstream buying interest increased, leading to a good trading atmosphere during the day. The market's fundamental situation improved, and the spot basis strengthened.

In summary, with the continuous decline in prices in the early stages, the supply-demand contradiction of polypropylene has been converted into price adjustments, which are gradually being digested. As we enter the fourth quarter, the supply-demand pattern of polypropylene is improving. On the supply side, there is only the expected release of a new capacity of 400,000 tons/year from Guangxi Petrochemical, marking the end of the high expansion cycle and entering a recovery phase. Particularly, the sudden introduction of the port fee policy raises questions about future supply stability, and there is a significant probability of a decline in the utilization rate of PDH capacity. On the demand side, low raw material inventory combined with high profits supports a recovery in demand, which is expected to enter a positive feedback loop. The trend of high growth in exports is maintained, and the annual export plan supports raw material consumption in the fourth quarter. It is anticipated that polypropylene will recover from the previous excessive decline and enter an upward range, with prices verifying transactions around 6,800-7,000 yuan/ton.