Brief analysis of factors affecting the PP market in East China in the later period

1. Trend Review

In August, the PP market price in East China was stable and slightly higher, and the transaction continued to be flat. Sinopec and PetroChina launched a wave of price increases, which played a certain role in driving the market. In addition, the overall resources in the market were not abundant, and most traders maintained a good mentality and mainly followed the small price increase to ship goods. However, due to the weak terminal demand and the limited acceptance of downstream factories due to fear of high prices, the overall trading has always been in a bad state.

II. Market Forecast

Upstream market: International crude oil, OPEC will hold a meeting in Algiers, the capital of Algeria, from September 26 to 28. Many rumors are that at this meeting, member countries will reach a production freeze agreement, and Russia will also join the production freeze to prevent oil prices from falling further. However, the opposing party is still worried because the oil production of major oil-producing countries has quietly soared to a new high. Propylene monomer, some domestic plants in China have been closed, and the market monomer supply has decreased, which may provide some support for short-term prices.

Market supply: The 2016 China Hangzhou G20 Summit is approaching. In order to ensure the air quality during the meeting, Zhejiang has introduced an environmental protection plan for the "West Lake Blue" action. Polluting enterprises in the jurisdiction will be divided by region and level, and measures such as suspension and production restriction will be taken respectively. At that time, many PP petrochemical units will be involved. According to the frontier news, Shaoxing Sanyuan and Ningbo Formosa Plastics plan to stop for maintenance at the end of August and mid-September. Shanghai Petrochemical's first and second lines may be operated in turn. Zhenhai Refining and Chemical is initially scheduled to reduce load production. Yangzi Petrochemical, Ningbo Fude, and Donghua Yangtze River Petrochemical are waiting for the final decision. This policy may provide support for the short-term supply of the market.

Petrochemical: Petrochemical enterprises are not under great inventory pressure. The release of goods continues to decrease near the end of the month. The current situation of tight supply in the market may continue. The intention to support prices remains unchanged, which may provide strong support for spot goods.

Downstream industries: As a sensitive area for environmental protection, the plastics industry is naturally attracting much attention at this special moment. It is reported that most of the enterprises that stopped production during the G20 control period were concentrated in high-pollution product enterprises. Although many plastic product enterprises were involved, including woven bags, BOPP, daily necessities, wires and cables, and some blow molding enterprises, most of them did not produce much pollution during the production process, so they were basically ordered to reduce production. A daily necessities product enterprise said that they did receive relevant notices, but because the plastics industry has not been prosperous recently, their original operating rate was only 70-80%, so reducing the load to 50-60% would not have much impact.

On the whole, the downstream factories' acceptance strength was originally weak, and they will now face the control of the G20 summit. The stubborn disease of weak demand will continue to hinder the development of the market. However, supported by factors such as the firm quotations of petrochemical enterprises and low social inventory, the possibility of a decline in the future market is not great. It is expected that the PP market in East China in the near future may be a stable market with small-cap adjustments.