In the fourth quarter of 2018, due to abundant supply and weak demand, the supply and demand pattern of polypropylene market was seriously unbalanced and prices continued to weaken. Since the end of the year, with the gradual rise of international crude oil prices, the cost focus of polypropylene has been shifting upwards, and the price has risen accordingly. However, as the problem of oversupply has not been alleviated, the trend of polypropylene is obviously weaker than other chemical products.

Strong cost support

The sustained rise in crude oil prices is the main reason for this round of polypropylene price rebound. According to OPEC’s monthly report in March, the global crude oil demand in the first quarter is 99.02 million barrels/day and the supply is 99.03 million barrels/day (of which, in March, OPEC’s output is 30.4 million barrels/day, non-OPEC’s output is 63.59 million barrels/day, OPEC’s LPG and unconventional oil and gas supply is 5.4 million barrels/day). There is only 10,000 barrels/day surplus in the global market, and the supply and demand basically reach a

Saudi Arabia and Russia are resolute in reducing production and raising prices; Venezuela’s crude oil production is expected to decline further due to the turbulent domestic situation and Iran’s further sanctions imposed by the United States; the number of active drilling wells in the United States is continuously decreasing, and it is difficult for production to rise in the short term. Later, the international crude oil supply will shrink further, the market will develop from oversupply to shortage, and the price of crude oil is likely to rise further.

Fundamentals remain weak

On the supply side, at present, the start-up load of polypropylene production enterprises in China is 88.33%, which is 1.43% lower than the previous statistical period. Among them, Sinopec Yangtze Petrochemical plant started, while Hunan Changsheng plant stopped; PetroChina Dalian organic new plant stopped. In early April, Dalian Organic and Zhejiang Hongji’s plant is expected to start up and domestic supply will increase. Incrementally, Jiutai’s MTO device is in the test run stage, and the product is expected to be launched in May.

In terms of stocks, the petrochemical stocks of polypropylene have declined. However, the previous inventory is not digested by the terminal, but transferred to traders and downstream enterprises. Therefore, although Petrochemical stocks have declined, because of the backlog of downstream stocks, downstream enterprises are not willing to take goods, more are just in need of purchasing, and the bargaining power of petrochemical enterprises has not improved.

In terms of demand, downstream start-up load is relatively stable. Among them, the start-up load of plastic knitting enterprises is 67%, the start-up load of copolymer injection molding enterprises is 65%, and the start-up load of BOPP enterprises is 56.8%. Later, the household appliances industry is about to enter the peak consumption season, and the demand for copolymer injection moulding is expected to increase, which forms a certain support for the price of polypropylene.

Forecast for future market

In summary, the previous rise in polypropylene prices was largely driven by rising costs. At present, the global crude oil supply and demand pattern is changing from tight balance to supply shortage. The momentum of price rise is sufficient, and the cost-side support for polypropylene is obvious. However, on its own fundamentals, supply is relatively abundant, and terminal demand shows no obvious signs of warming up. Although Petrochemical inventories have declined, they are only transferred downstream and not digested by the terminal. In this case, the rise of polypropylene price should be treated as a temporary rebound. The rebound height of polypropylene depends on the increase of crude oil price. Operationally, the suggestions are mainly short.