Tight Supply Leads to Price Rebound China PP Market in May

Raw Materials:Throughout might, high-level signals regarding relations between the Middle East, the U.S., and Iran were released frequently, generally conveying a relatively positive outlook. From a prolonged perspective, the supply deficit in crude oil is expected to narrow gradually; however, a full resumption of shipping traffic through the Strait of Hormuz will still require some time. Market sentiment remains divided, with geopolitical risk premiums and fundamental market factors locked in a complex interplay within a specific price range. In the latter part of the month, oil prices experienced a rapid decline, causing the prolonged cost outlook to PP to soften. Regarding propylene—a key feedstock—market demand and purchasing activity remained steady; however, several production facilities belonging to various companies restarted operations during the month. Expectations of increased supply exerted downward pressure on prices, leading to a partial retracement of earlier gains and a high-level market correction. Overall, the market to PP raw materials saw mixed trends, and the cost support provided to PP prices weakened toward the end of the month.

Supply: During might, the domestic PP sector witnessed numerous instances of production shutdowns and restarts, keeping the overall operating rate situated within a historically low range. Facilities that resumed operations included those at Zhong'an United, the second and third lines at Guangdong Petrochemical, and Dagang Petrochemical, among others. Conversely, facilities that underwent shutdowns included those at Hongji Petrochemical, Zhongsha Tianjin, and Yangzi Petrochemical. As of the time of writing—following these restarts—the overall operating load of the domestic sector remains below 50%, and weekly production volume has fallen below 670,000 tons. Current inventory levels stand below 700,000 tons, indicating that overall market supply remains relatively tight. In summary, the supply side continues to provide strong support to spot market prices.

Demand: Influenced by the speculative price rally observed at the end of the first quarter, PP prices remained at a relatively high level throughout might. Downstream sectors of the sector continued to show strong resistance to these elevated prices, resulting in a generally cautious trading atmosphere. Currently, buyers are adopting an "on-demand" purchasing strategy; new position-building activity remains lackluster, with the market dominated by scattered, small-volume orders placed solely to meet immediate consumption needs. Furthermore, weighed down by high cost pressures, small and micro-sized terminal companies have seen only limited improvements in their operating rates, while substantial and medium-sized companies continue to maintain a steady and consistent approach to purchasing. Overall, the demand side of the market is characterized by a "wait-and-see" attitude, offering only moderate support to PP prices. Market Outlook

In might, domestic PP market prices experienced fluctuations during the first half of the month, followed by an upward direction in the second half. From a fundamental perspective, maintenance shutdowns remained concentrated throughout might, causing sector operating rates to bottom out; meanwhile, arrivals of imported materials at ports remained at low levels, leading to a tightening of spot market supplies. However, given the evaporative and weakening direction in production costs—coupled with sluggish demand and expectations of a return to full production capacity in June—analysts at SunSirs believe that the current PP market is characterized by weakness on both the supply and demand fronts. Consequently, upward momentum in the near-term market is expected to face resistance, and the magnitude of any further price increases is likely to be constrained.