PP prices dropped after soaring, with mainstream prices inching lower.

As seen from the above chart, PP price trends were divided into three stages from January to August 2022. The prices showed violent changes in the first stage, saw ups and downs in the second stage, and fluctuated downwards in the third stage. As of end-August, the yearly high was RMB 9,625/mt in the first stage, which gained 0.79% Y-O-Y. Besides, PP prices registered a low level of RMB 7,800/mt, declining by 7.69% Y-O-Y.

Crude oil values recorded high, promoting PP prices touched yearly highs.

Crude oil values lingered at highs after jumping up. In the first stage, PP prices followed the trends of crude oil prices, and high crude oil price was the major driver to boost PP prices. But later, sluggish downstream demand put a dampener on the PP market in the second stage, during which high costs and soft demand led to mixed PP prices. The PP industry gradually entered the traditional demand dull season in the third stage, and temperatures were high. A few downstream enterprises curtailed operating rates, indicating that demand remained soft. PP mainstream prices began to decrease.

PP downstream operating rates stayed low with scarce orders from end-users.

PP downstream enterprises encountered high inventory of finished products owing to the slack sales in 2022. As a result, downstream enterprises maintained low operating rates and represented limited demand for PP. According to SCI, operating rates at plastic woven enterprises between January and August 2022 declined by 8% Y-O-Y, and those at injection product enterprises also registered 8% Y-O-Y decreases. Those at BOPP enterprises remained flat.

High costs and soft demand pressured the production at PP producers.

Remarks: OR = operating rate

Facing high costs and tepid demand, PP producers showed poor initiatives in production. SCI learned that PP monthly output in the first eight months of 2022 showed Y-O-Y increments, and cumulative output rose by 5.38% Y-O-Y. However, the industry operating rate plunged from last year, and the average operating rate between January and August dropped by 6% Y-O-Y.

Generally, PP industry operating rates decreased to around 80% with heavy costs and subdued demand. PP mainstream prices were impaired by soft demand.

Supply and demand will probably amid a constant struggle in September, and demand is expected to improve.

In September, downstream processors are supposed to uplift operating rates gradually with high temperatures ending, reflecting rising demand for PP. Besides, the consumption of PP booms due to the term beginning at school, traditional festivals in China, consumption coupon releasing and sales promotion strategies in the home appliance and automobile industries. In September, sales are bettered compared with last month, some downstream processors said. But for supply, SCI holds that it may inch up as some units will resume production, even if several producers plan to take an overhaul. Therefore, PP supply and demand are still in the tug of war in September. PP prices are predicted to mount up, but the upward range is likely to be limited.