SunSirs: Tight Supply Leads to Price Rebound China PP Market in May

According to data from SunSirs' "Spot Connect" service, domestic PP market trends in the first half of May saw a recovery following an initial decline, followed by an upward trend in the second half of the month. Price fluctuations across various product grades remained relatively narrow. As of May 31, the SunSirs benchmark price for PP filament-grade material stood at 9,723.33 RMB/ton—an increase of 1.81% compared to the beginning of the month.

Raw Materials:Throughout May, high-level signals regarding relations between the Middle East, the U.S., and Iran were released frequently, generally conveying a relatively positive outlook. From a long-term perspective, the supply deficit in crude oil is expected to narrow gradually; however, a full resumption of shipping traffic through the Strait of Hormuz will still require some time. Market sentiment remains divided, with geopolitical risk premiums and fundamental market factors locked in a complex interplay within a specific price range. In the latter part of the month, oil prices experienced a rapid decline, causing the long-term cost outlook for PP to soften. Regarding propylene—a key feedstock—market demand and purchasing activity remained steady; however, several production facilities belonging to various enterprises restarted operations during the month. Expectations of increased supply exerted downward pressure on prices, leading to a partial retracement of earlier gains and a high-level market correction. Overall, the market for PP raw materials saw mixed trends, and the cost support provided to PP prices weakened toward the end of the month.

Supply: During May, the domestic PP industry witnessed numerous instances of production shutdowns and restarts, keeping the overall operating rate situated within a historically low range. Facilities that resumed operations included those at Zhong'an United, the second and third lines at Guangdong Petrochemical, and Dagang Petrochemical, among others. Conversely, facilities that underwent shutdowns included those at Hongji Petrochemical, Zhongsha Tianjin, and Yangzi Petrochemical. As of the time of writing—following these restarts—the overall operating load of the domestic industry remains below 50%, and weekly production volume has fallen below 670,000 tons. Current inventory levels stand below 700,000 tons, indicating that overall market supply remains relatively tight. In summary, the supply side continues to provide strong support for spot market prices.

Demand: Influenced by the speculative price rally observed at the end of the first quarter, PP prices remained at a relatively high level throughout May. Downstream sectors of the industry continued to show strong resistance to these elevated prices, resulting in a generally cautious trading atmosphere. Currently, buyers are adopting an "on-demand" purchasing strategy; new position-building activity remains lackluster, with the market dominated by scattered, small-volume orders placed solely to meet immediate consumption needs. Furthermore, weighed down by high cost pressures, small and micro-sized terminal enterprises have seen only limited improvements in their operating rates, while large and medium-sized enterprises continue to maintain a steady and consistent approach to purchasing. Overall, the demand side of the market is characterized by a "wait-and-see" attitude, offering only moderate support to PP prices. Market Outlook

In May, domestic PP market prices experienced fluctuations during the first half of the month, followed by an upward trend in the second half. From a fundamental perspective, maintenance shutdowns remained concentrated throughout May, causing industry operating rates to bottom out; meanwhile, arrivals of imported materials at ports remained at low levels, leading to a tightening of spot market supplies. However, given the volatile and weakening trend in production costs—coupled with sluggish demand and expectations of a return to full production capacity in June—analysts at SunSirs believe that the current PP market is characterized by weakness on both the supply and demand fronts. Consequently, upward momentum in the near-term market is expected to face resistance, and the magnitude of any further price increases is likely to be constrained.

SunSirs has been continuously tracking price data for over 200 commodities for nearly 20 years, please contact support@sunsirs.com for subscription.