The sales price of petrochemical regions decreased slightly, and the cost to the market weakened. Their own inventory is still high, but slightly better than in the previous period. Downstream factory orders have not changed significantly compared with the previous period, and demand is difficult to improve in the short term. The maintenance of petrochemical equipment will increase, so that the future market supply will decrease, and the contradiction between supply and demand in the later stage of the market will be alleviated to a certain extent.
I. Market review
Overhaul gradually increase polypropylene can reverse?
At the beginning of this week, the price of polypropylene petrochemical was lowered, the cost of the market was weakened, and the spot traders followed the price down, allowing the profit to be shipped. Polypropylene, polypropylene quotes, polypropylene manufacturers. However, with the volatility of the futures price, the spot price has gradually stabilized, and some merchants have slightly tested the shipment of high prices. PP1705 contract as a whole this week showed a volatile upward trend, since mid-to-late February, PP1705 contract weak downward, below the early 8420 low, down 8000 line, the formation of strong support, short-term is expected to test the early 8420 line pressure level.
II.Analysis of influencing factors
(i).Upstream crude oil price trend analysis
Overhaul gradually increase polypropylene can reverse?
While OPEC's February production cuts were generally good, diverging data from Saudi Arabia and the resurgence of shale oil, with U.S. crude production topping 9.1 million barrels per day, added to market concerns. If current production levels are maintained when the agreement expires in June, the market could be short by 500,000 barrels per day in the first half of 2017, assuming no change in supply and demand forecasts. If Opec does not renew the production cut agreement after it expires in June, and the number of U.S. inventories and retares continues to grow, crude oil prices could fall below $40. The dollar fell in the short term in March, but it is still positive for the dollar and negative for oil prices in the medium and long term. Oil prices are expected to remain weak and volatile in the near future. In the short term, it is difficult to have obvious guidance for the entire polyolefin industry.
(ii). petrochemical equipment maintenance
At present, the maintenance capacity reaches 2.21 million tons, and the affected output this week is 27,100 tons. Shenhua Yulin, Zhongtian Hechuang, Tianjin joint equipment on the same day parking maintenance, the supply side continues to tighten. Later Changzhou Fude design capacity of 300,000 tons of equipment will also enter the maintenance period.
(iii). Polypropylene inventory analysis
In this cycle, the main domestic PP production enterprises and some middlemen inventory has changed little compared with the previous cycle. According to statistics, the domestic major petrochemical inventories this week decreased by about 1.16% compared with the previous cycle, and the middleman inventory increased by 0.12% compared with the previous cycle. The overhaul of petrochemical equipment gradually increased, the speed of inventory digestion accelerated, and some of the port inventory was transferred to export. Next week, the number of enterprise equipment maintenance will increase, Tianjin United, Maoming Petrochemical, Shenhua Xinjiang will carry out equipment maintenance. It is expected that the pool of PP petrochemical enterprises will continue to shrink next week.
This week, polypropylene downstream enterprises started relatively stable, although the spot raw material prices weak downward, but due to the limited growth of terminal enterprise orders, coupled with the slow digestion of product inventory, manufacturers more on-demand procurement, active stocking willingness is insufficient.
III.Future market forecast
Upstream market: Although U.S. crude oil inventories unexpectedly fell this week, and OPEC announced production cuts in February, the overall performance was good. But conflicting data from Saudi Arabia and a resurgence in shale oil, with U.S. crude production topping 9.1 million barrels per day, added to the market's concerns. In the near future, the international crude oil price may maintain the overall weak and volatile trend, and it is difficult to have an obvious guidance for the polyolefin market.
Supply and demand situation: there is no significant change in downstream factory orders compared with the previous period, and demand is difficult to improve significantly in the short term. At present, the petrochemical inventory is still high, but considering the increase of petrochemical maintenance devices, the future supply of market supplies will be reduced, and the petrochemical inventory situation will continue to improve.
PP1705 contract fell below 8420 in the early part of this year, a low of 8000 line since January this year, broke through 8250 line this week, forming support near here, there is the possibility of continuing to rise in the near future, is expected to test near 8600 line. The overall PP1705 contract is expected to remain in the 8200-8600 range next week.
