Where to start
In July, the PP market price remained at a high level, which is closely linked to strong support from the supply side. Looking ahead to August, although new production capacity will be fully released, there are still many planned maintenance units, and the tight supply of spot resources is expected to persist. Therefore, it is anticipated that supply-side support for the market will remain in August.
Spot Supply is Tight, Providing Strong Support from the Supply Side
Although July is the off-season for demand, and weak demand has limited market transaction performance, ongoing geopolitical conflicts have kept PP cost support relatively stable. Additionally, the PP industry operates at a low capacity, with production companies facing no short-term inventory pressure. The continued tight supply of spot goods on the market has jointly supported price performance.
PP Industry Operating Rate at a Historic Low; Strong Supply-Side Support
Since March, ongoing geopolitical conflicts have led to tight raw material supply for PP. Combined with the spring maintenance season in April and May, the industry's overall operating rate has continuously declined. This, coupled with a vacuum in new capacity during the first half of the year, has resulted in a significant contraction on the supply side, supporting the spot market. According to data, the PP industry operating rate in April was 62.18%, a historic low, which further exacerbated the tight spot supply situation. From May to July, although some previously shut-down units like Quanzhou Guheng and Gulei Petrochemical have gradually restarted, PP maintenance units remain concentrated overall. As of July 31, the PP shutdown rate was 22.77%. It is estimated that the full-month PP operating rate for July will remain at a low level under 70%. Furthermore, with significant pre-sales and overselling from mid-to-upstream companies earlier, the tight spot supply situation is difficult to alleviate, especially the structural tightness in supply sources, which provides strong support for market prices.
Numerous Planned Maintenance Units; Supply Bottom Support Remains
At the end of July, the domestic PP industry's operating rate, though slowly increasing, remained at a low level around 70%. Looking ahead to August, while the new 450,000-ton/year unit at Tarim Petrochemical is running smoothly and impacting the market, core disagreements over the management authority of the Strait of Hormuz shipping lane persist. The issue of tight upstream raw material supply is unlikely to ease significantly, which could lead to an increase in forced PP plant shutdowns. Based on current statistics, several units are planned for maintenance in August, including the Sinochem Quanzhou first line and Datang Duolun. Furthermore, the major overhauls at Yan'an Refinery and Yanneng Chemical have been postponed to August. Therefore, it is expected that maintenance units will remain concentrated next month, keeping spot supply tight. With production companies having no short-term inventory pressure, supply-side support is expected to persist in August.
Supply Remains Tight; Demand Recovery Later in the Month Also Supports the Market
In August, geopolitical volatility and raw material supply will significantly impact the PP operating rate. With many planned maintenance units for PP in August, the tight spot supply situation is expected to be difficult to alleviate, and supply-side support will remain relatively strong. Simultaneously, the market will gradually enter the peak demand season in the latter half of the month, with a phased improvement in demand expected to support the market. These factors are expected to jointly drive a slight price increase. Taking the East China region's raffia price as an example, the operating range for raffia in August is expected to be between 8,500 and 9,300 yuan per ton.
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