Polypropylene PP: There is 415,000 tons of petrochemical inventory accumulation, and it’s necessary to be vigilant against supply pressure counterattack after the opening of the high price offers

During the Spring Festival holiday, domestic futures were suspended, and spot market trading was also quiet. However, the external crude oil continued to rise, giving the market cost support. Although the two oil inventories have accumulated to 990,000 tons, it is still difficult to change the high enthusiasm of the market. On the first day of the opening of the market, the polypropylene market took the lead in rising without the guidance of futures, and the domestic wire drawing price was 7300-7500 yuan/ton, 40-150 yuan/ton higher than before the holiday. At present, the tentative offers of holders are the mainstream at the market, and the procurement of downstream factories has not yet been fully launched, and some of them are still tentative inquiries, and actual potential inquiries are still scarce, waiting for guidance after the futures market opens.

Petrochemical has accumulated significantly

Before the holiday, the intermediary actively completed the petrochemical assessment indicators, and the downstream enterprises just finished storage and procurement, and the inventory of the two oils fell to a relatively low level of 575,000 tons during the year. After returning back from the holiday, petrochemical inventories have accumulated significantly. As of February 18, the two oil inventories were at 990,000 tons, which was comparable to the level of the same period in 2022, an increase of 415,000 tons or 58.1% from before the holiday. There are two reasons for the large accumulation of inventory: first, a large number of manufactures suspended trading during the double festival; second, the new production capacity continued to increase, the PP production capacity base continued to expand, and the market supply increased.

The number of maintenance and restart devices has increased

During the holiday, the number of maintenance and restart devices has increased, and the supply of polypropylene market increased significantly compared with that before the holiday. And the new capacity expansion of Anhui Tianda and Quanzhou Guoheng, which was postponed for maintenance before the Spring Festival, is still on the way, and the market supply pressure should not be underestimated.

Trend forecasting

As far as futures are concerned, under the rise of crude oil on holidays and today's higher spots market, Monday's high opening has become a highly probable event. In regard of the spot market, upstream destocking has become the top priority of the current market. On the one hand, the factories’ petrochemical inventory is high, and on the other hand, the production has increased again due to the restart of devices maintenance. The supply pressure of the polypropylene market is greater after the holiday. As the demand side, although downstream factories are expected to replenish their rigid needs in the warehouses after the Spring Festival, the traditional downstream enterprises of polypropylene, such as plastic weaving and BOPP, is relatively weak in the seasonal demand compared with polyethylene mulch. In recent years, the new orders in the downstream have been less than expected, and the resistance to high-priced raw materials has inhibited the demand side. From the perspective of speculative demand, more attention is paid to futures trends and basis changes.