Polypropylene's weak ending is almost a foregone conclusion

Since December, the domestic polypropylene market continued its weak decline last month. The author expects that the good market will not be expected in the last January of this year, and all parties should prepare for the disappointing end of polypropylene early.

At present, the domestic polypropylene market is in an overall upward trend. In order to reduce inventory at the end of the year, manufacturers have lowered their prices. Last weekend, PetroChina Daqing Petrochemical and Fushun Petrochemical successively lowered their prices by 200 yuan (t price, the same below). Sinopec Guangzhou Petrochemical and Maoming Petrochemical also significantly reduced their prices by 450 yuan. Although Sinopec Huadong and PetroChina’s East China East are still stable in pricing, the downward price adjustments in the northeastern and southern regions have led to lower prices in the surrounding markets. This, coupled with the lack of confidence in the market outlook, has caused most traders to dare to stockpile their goods, reducing downstream orders at the end of the year. Demand was even lighter, causing polypropylene to continue to fall all the way down the road. It is still unclear when it reaches the bottom.

The increase in US crude oil inventories, the enthusiasm of market speculation, the decline in international crude oil prices, the oversupply of the propylene market, and the price plunged endlessly. The support factors of the upstream market weakened, adding a layer of pessimistic clouds to the business mentality. In terms of external disks, although the Asian propylene market has seen a decrease in the operating rate of crackers, market resources have been tightened, and prices have gradually increased, the supply prices of ports have remained low, affecting the domestic market. Together with the increase in port cargo to Hong Kong, it also makes it more difficult to digest market resources. According to the latest report of IHS SRI, China will have 1.1 million tons of capacity released in 2012, including PetroChina Daqing, PetroChina Hohhot, PetroChina Sichuan, and Sinochem Quanzhou. Under the pressure of many negative factors, the domestic polypropylene market is difficult to pick up.

The current situation of downstream construction is still not optimistic, especially for export processing companies, which are greatly affected by the financial crisis. Although the government has introduced a series of policies to stimulate domestic consumption, such as home appliances to the countryside, but due to the large amount of finished product inventory in the early stage, it has failed to promote the reproduction of the factory. Before the economic situation really improves, it is difficult for the downstream demand to recover substantially. If the international crude oil and propylene monomer prices continue to decline, the polypropylene market may once again face a substantial adjustment.

With regard to macroeconomic factors, the debt problem in Europe has still not been effectively resolved. The manufacturing data in Europe and the United States is relatively weak. The market has great concerns about global economic growth. This is also a stumbling block to the rise in polypropylene prices. The substantial downgrade of the listing price confirmed the market's concerns. For active shipments, traders’ offerings mostly declined slightly. As the market continues to oscillate and the long-term contradiction between supply and demand, traders will not be willing to buy goods. The domestic central economic work conference is about to be held. The market is waiting for the wait-and-see period. The terminal is influenced by the “buy up, not buy or fall” mentality, and the purchase is hesitant.

The Spring Festival approaching, most companies are facing the problem of capital return, coupled with the current low number of downstream factory orders, some companies are facing early shutdown, market demand will continue to bear the dilemma.