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China: Factors Impacted on PP Market Prices

https://www.chemnet.com   Aug 05,2010
Followed by several month of fall, China polypropylene (PP) market rebounded over CNY10,500/tonne since in July. Distributors regained confidence, and expected an upturn market. However, the fast climbing prices were caused by re-sellers’ speculation, instead of stronger demand from end-users. Therefore, distributors believed the uptrend was unlikely to last long.

The writer listed factors impact on PP prices as follows.

A. supply will shrink significantly with the mass maintenance

According to CBI statistics, the PP production losses are expected to reach 80,000 tonnes in the recent two months, which provides confidences for distributors and a support for price increasing.

The maintenance schedules of major producers are as follows:

1. Daqing Refinery’s 300,000 tonne/year of PP unit is expected to shut down for scheduled maintenance from 20 August, which will cause 10,000 tonnes of production losses.

2. Daqing Petrochemical (PC)’s 100,000 tonne/year PP unit is shut for maintenance during 8 July to 16 August, which will cause 10,000 tonnes of production losses.

3. Yangzi PC’s 400,000 tonne/year of PP unit is planned to shutdown for 20 days from 13 August, which will cause 22,000 tonnes of production losses.

4. Formosa Plastics Group (Ningbo) expected to shut down its 450,000 tonne/year of PP plant for a 20-30-day maintenance from 13 August, which will cause 30,000 tonnes of production losses.

5. Zhongyuan Ethylene’s 60,000 tonne/year of PP unit is shut down for a 10-day maintenance from 30 July, which will cause 1,600 tonnes of production losses.

6. Panjin Ethylene’s 250,000 tonne/year of PP unit is shut down for 15-20 days from 20 July, which will cause 10,000-13,000 tonnes of production losses.

B. the frequent technology problems of crackers supported Asian propylene monomer prices

Since July, the Asian propylene monomer prices were supported by the unexpected shutdown of the regional crackers. Therefore, PP import prices were enhanced. Meanwhile, Chinese importers were unwilling to sale due to limited inventories as well as difficulties in storing low-cost additional supply.

C. uncertain factors would probably impact on the prospect

Downstream demand was still weak. Despite the sharp rising prices, buying activities slowed down at the end of July. Though the downstream plastic sector is expected to break away from the traditional off-season in August, end-users resisted the higher prices.

Besides, the prices of international crude oil and related product polyethylene (PE) will also impact on PP market prices and distributors’ confidence.

In conclusion, China PP market prices will be volatile in August on a combination of factors.
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