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In recent years, PP market volatility has intensified, the main 2005 contract rushed back to backwardness on Monday, leaving a long shadow line on the daily line, and short-term market sentiment has plummeted. The author believes that under the expectation of continuous increase of supply and decline of demand in the off-season, the supply and demand margin of PP will weaken before the Spring Festival, and the middle and upper reaches of the industrial chain will return to the accumulation cycle. After a round of base recovery market, the downward space of futures price is opened, and the future PP price will weaken again.

Pressure on Supply

Since the fourth quarter, PP supply has maintained an overall growth trend, and the supply pressure is still gradually realized.

First of all, after the peak season of the industry maintenance in the third quarter, the maintenance capacity has gradually returned. According to statistics of Zhuo Chuang information, the maintenance loss of domestic PP plant in November was about 203600 tons, a decrease of 49800 tons compared with October. Most of the devices under short-term maintenance are long-term shutdown or temporary shutdown, and the industry's operating rate is at a high point in the year. It is expected that the impact of maintenance in December on PP supply will be further weakened.

Secondly, the operation of new units such as Jiutai energy, Hengli petrochemical and Baofeng phase II, which were put into operation in the year, has been kept stable gradually, and most of them are scheduled to produce wire drawing materials, and the expectation of new capacity release has been accelerated. In addition, recently heard that Zhejiang Petrochemical, Hengli phase II and other devices will be put into production before the Spring Festival, which makes the expectation of future PP supply growth unchanged.

Finally, since October, the external quotation has declined as a whole. The transaction price of some foreign wiredrawing materials in December has fallen below 900 US dollars / ton, equivalent to 7600-7700 yuan / ton of import duty paid cost. The opening of PP import profit window will also put pressure on the domestic market.

Accumulation cycle ahead

In the short term, the rigid demand support of PP downstream plastic knitting, BOPP and other industries remains, which is also one of the main reasons for the current low Petrochemical inventory under the background of supply growth. Near the Spring Festival, with the decrease of orders from downstream processing enterprises and the expected increase of shutdown, PP demand is facing a seasonal decline, and speculative demand is difficult to see the possibility of positive release under the trend of price decline.

In addition, in recent days, the air in many places in the North has been seriously polluted. Under the emergency response of the government, the normal operation of relevant plastic processing enterprises will also be limited, which will aggravate the decline of PP demand. Therefore, with the weak demand in the off-season, the trend of petrochemical inventory in the upstream of PP is close to the turning point, and the stock accumulation cycle will be advanced due to the earlier spring festival this year than in previous years.

End of base recovery

Since late November, under the stimulation of macro release and market expectation, PP period price has experienced a rebound of nearly 400 points, but the spot price still kept a downward trend in the same period. The mainstream price of PP drawing materials in East China market fell from 8400-8500 yuan / ton in the middle of November to 8000-8100 yuan / ton, and some low-end coal chemical materials fell below the 8000 yuan / ton threshold.

The deviation of the current price trend led to the repair of the expanding basis in the early stage. The current basis of pp2001 has fallen to about 100 yuan / ton, and the basis of new main contract pp2005 has also fallen below 500 yuan / ton. The author believes that in the context of accelerated expansion of production capacity, the pattern of PP futures discount is difficult to change, but under the pressure of continuous trade friction between China and the United States, the macro level is still facing greater uncertainty. Therefore, the short-term basis recovery market is coming to an end. With the macro benefits being gradually digested by the market and the fundamentals returning to the accumulation cycle, PP will once again open a downward channel.

On the whole, PP supply growth pressure is gradually realized, and with the coming of the Spring Festival demand off-season, the contradiction between supply and demand is expected to further deepen, and it is expected that the future PP price will continue the medium-term downward trend.