【China plastic machinery network industry dynamics】Driven by rising crude oil and capital, polypropylene futures have rebounded since bottoming out at the end of December 2015. Since March this year, due to the early rise did not get the fundamentals, polypropylene prices show a high wide oscillation trend, the oscillation range in 6600-7100 yuan/ton, polypropylene oscillation for two months shows that the current divergence between the two sides is relatively large, the market is looking for direction. The following will focus on the fundamental point of view to discuss the future polypropylene price in which direction the probability of breakthrough is greater.
Discussion: In which direction is the probability of polypropylene price breaking greater?
The supply pressure of new production capacity has emerged.
In recent years, the production of coal-to-olefin equipment intensive period, due to the slump in olefin prices in 2015, led to some coal-to-olefin enterprises delayed production plans, resulting in the production of polypropylene equipment concentrated this year. From the expected situation of the market at the beginning of this year, the capacity growth of polypropylene this year is the largest of all chemicals, with an increase of 3.61 million tons/year, a growth rate of 20.76%. However, the recent news released by the market shows that the production period of polypropylene equipment this year is mainly concentrated in the second and third quarters. Among them, 350,000 tons of production capacity of Fujian Zhongjing Petrochemical has been put into operation in March; In April, the 300,000-ton polypropylene plant of China Coal Mengda has been successfully started, and will be mass-produced in the later stage. Shenhua Urumqi's 300,000 tons of production capacity, Ningbo Fucornerstone Chemical's 400,000 tons of production capacity, Guangzhou Petrochemical's 200,000 tons of production capacity in the second quarter is more likely to be put into production; In addition, another 2.06 million tons of capacity will be put into operation in the third quarter. Therefore, in the medium and long term, the supply of domestic polypropylene tends to be relaxed.
From the situation in May, due to the maintenance of polypropylene equipment in some enterprises, the domestic polypropylene supply is slightly tight. At present, only Shenhua Baotou's 400,000 tons of production capacity and China-Korea Petrochemical's 400,000 tons of production capacity are still in parking maintenance, and they are also planning to resume production in May, and no companies have announced parking plans in the near future. Therefore, the domestic installation load in May will be at a high level, in the short term, polypropylene quotation, the supply of polypropylene on the entire market is also tending to loose.
Discussion: In which direction is the probability of polypropylene price breaking greater?
Demand is temporarily lackluster. Consumption is unlikely to pick up.
Due to the rising price of polypropylene, corporate profits are considerable, and it is expected that polypropylene manufacturers will increase production efforts. However, supply and demand are, after all, "a matter of two people", and if there are signs of improvement on the demand side, prices can also be expected to rise. So what about the situation of downstream polypropylene consumption in the near future?
First of all, although the economic data in the first quarter is good, but the downward trend of the entire economy is difficult to change in a short period of time, so downstream consumption is difficult to tell a story, especially for polypropylene this seasonal consumption is not obvious varieties, demand is even more difficult to appear significant changes. Secondly, from the downstream consumption situation, the current operating rate is maintained at a high level, but because the price of plastic preparation of finished products is at a low level, the price of polypropylene is at a relatively high level, making the profit of the plastic knitting industry is compressed, downstream enterprises are not active in stocking, basically take the buy-and-use strategy. At the same time, the copolymerization injection molding industry has sufficient inventory, limited market transactions, and only the receiving of goods from relatively small BOPP enterprises is relatively positive, so the price rise of polypropylene this round did not get a positive response from downstream consumption. In addition, due to the stagnating price of polypropylene, the recent downstream enterprises are mainly short orders, more is in the clearance, which leads to the recent increase in petrochemical inventories, and petrochemical enterprises in order to avoid rising inventories, but also by lowering prices to give profits to traders to sell inventory.
Overall, due to the concentrated production of new polypropylene capacity in the second and third quarters, the supply pressure of polypropylene in the later period has increased. In addition, from the current situation on the demand side, the downstream enterprises have not responded positively to the rise in polypropylene prices, so the demand side does not support the rise in polypropylene prices, and short-term catch-up needs to be cautious.
