Strong Macro Expectations Meet Traditional Golden September: Can The Polypropylene (PP) Market Respond With An Uptrend

8 MonthPolypropylene MarketAfter a decline, there was an upward movement. The impact of the seasonal off-peak period in the first half of the month was evident, with no change in the loose supply pattern, and the desire to sell prompted continued price competition. The spot price hit a new low for the year, with raffia prices falling below 7,000 yuan/ton. In the second half of the month, the domestic anti-involution efforts and news of South Korea reducing naphtha cracking capacity resonated, causing the market to stop declining and move upward. Meanwhile, global central bank meetings released expectations of interest rate cuts in September, leading to a substantial rise in overseas stock markets. The onset of the rate-cutting cycle brought positive prospects to the commodity market. With the traditional peak season for polypropylene approaching, market confidence improved, and by the end of the month, market quotations cautiously followed the upward trend.

  Maintenance intensity has slowed down, but the loss volume remains high.  

In August, the intensity of maintenance slowed down, but the loss volume remained high. The expansion of loss volume kept the overall pressure on the supply side controllable. Although the number of newly maintained enterprises remained relatively high recently, the production loss caused by maintenance was effectively offset by the recovery of units and the increased output brought by new units coming online. Overall production data continued to show an upward trend.

9 In the month, 2 new maintenance production lines were added, involving a capacity of 800,000 tons, and 5 production lines are planned to be restarted. CNOOC Daxie Petrochemical plans to launch a capacity of 450,000 tons per year by the end of August, with an additional 450,000 tons per year capacity to be launched in early September. Supply pressure in September will be relatively high.

In October, there have been 9 new production lines undergoing maintenance, involving a capacity of 1.51 million tons, and 5 production lines are planned to restart. The new capacity in October is concentrated in the second phase of Guangxi Petrochemical, with a capacity of 400,000 tons per year.

As of now, there is one newly reported production line under maintenance in November, involving a capacity of 300,000 tons. There are plans to restart five production lines. No new capacity has been reported for November yet, but there is a possibility that the launch of new capacity in October might be delayed.

10 After the month, the expected loss due to equipment maintenance will significantly decrease. With the impact of new capacity additions and the anticipated reduction in maintenance intensity, the overall operating load rate of the equipment is expected to increase, and supply is expected to continue rising.

The commissioning of new production capacity is offset by high maintenance volumes.

The second line of the Daxie Petrochemical Phase II project, a new unit with an annual capacity of 450,000 tons, was successfully put into operation on August 23 and has already produced qualified products. Additionally, another 450,000-ton expansion is planned to be implemented in September. The Guangxi Petrochemical 400,000-ton unit is scheduled to be launched in late October. The concentrated start-up in East China is significantly higher than in other regions, with an increased tendency for regional cargo outflow, further intensifying competition among various regions.

The seasonal peak consumption period is approaching, and demand is gradually picking up.

Benefiting from the decline in upstream raw material prices, downstream processing profits remain decent. Domestic subsidy policies have been strengthened, and subsidy policies for white goods and consumer appliances will continue to favor polypropylene consumption. Additionally, recent improvements in absolute low-price transactions indicate the upcoming "Golden September and Silver October" demand season. Spot prices repeatedly hitting new lows have stimulated some factories to purchase goods. Despite the low prices, downstream demand for restocking remains supported. From a long-term perspective, the downside potential is relatively limited.

Peak season characteristics are emerging, and the average operating rate downstream is improving at the margin.

The characteristics of the downstream peak season are evident, with low raw material inventory. As demand seasonally rebounds and high temperatures gradually subside, the supply-demand margins improve. The operating rates in the polypropylene products industry show a differentiated trend; in most sectors, operations are on the rise, with only BOPP and PP pipes experiencing a decline, while modified PP remains stable. BOPP companies report pressure from recent demand follow-up, leading to temporary shutdowns of facilities, reflecting the contrast between rising orders and declining operations. In the absence of favorable policy support, the market trading atmosphere for PP pipes is lukewarm, with insufficient demand follow-up, resulting in a decline in industry operating rates. Other industries exhibit clear seasonal peak characteristics.

9 Monthly Market Focus

1 The assessment and evaluation of domestic production capacity have eased market expectations of oversupply to some extent. "Anti-involution" remains a key focus topic this year.

2 With the gradual introduction of new production capacity, market competition in the East China and South China regions is likely to intensify further, and attention should be paid to the impact of resource outflows on other markets.

3 After the tariff buffer period ends, the order front-loading effect brought by the previous "rush to export" will gradually fade, and future new export orders may face contraction.

4 In the second half of the year, domestic holidays are relatively concentrated, and favorable factors such as the recovery of packaging demand and policy subsidies will continue. Attention can be paid to the pull effect of seasonal consumption on raw material demand.

The trend of continuous accumulation on the domestic supply side remains unchanged, while the arrival of the traditional peak season has given some industry players confidence. Stimulating consumption continues to be a driving force for boosting economic momentum.