PP producers cut back offers to promote sales, leading to snug inventory pressure.

Since December 2024, PP inventory at major producers has kept declining. In view of the supply pressure brought by the restart of closed units and new capacity release, as well as the risk of inventory accumulation in the post-holiday market, PP producers actively adopt the destocking strategy to cope with the possible pressure of inventory accumulation during the Spring Festival holiday. This week, PP producers continued to implement active pricing strategies, especially some coal chemical enterprises that further lowered EXW prices, stimulating the willingness of traders and downstream factories to purchase. Overall, the current inventory level at Sinopec and PetroChina is lower than that of the same period last year, while that at coal chemical enterprises is maintained at a medium level. At present, the overall inventory pressure of PP producers has not yet appeared.

PP trader inventory piled up gradually with downstream consumption slowing down.

The PP inventory consumption of traders slowed down this week. On the one hand, downstream stockpiling came to an end with the Spring festival holiday drawing near, indicating reduced demand for PP. On the other hand, higher crude oil prices pushed up PP production cost, bolstered the market sentiment and underpinned the PP futures price. However, spot PP market prices got hampered by fundamentals. Downstream users represented weak interest in buying, while traders stocked up after PP producers whittled down offers. Therefore, traders saw an accumulation in inventory.

Downstream plants cut back operating rates and showed poor speculative demand before the holiday.

The downstream demand for PP further weakened this week, as downstream plants shut units down or ratcheted down operating rates. Facing sluggish orders, downstream plants adopted a cautious attitude toward the future market. Meanwhile, they stayed on the sidelines for PP fundamentals, so their purchase of feedstock was mainly based on sales. This week, downstream plants mainly bought cheap feedstock and represented limited interest in forward-month PP goods. It is predicted that more downstream plants will enter the holiday next week, reflecting that the downstream demand for PP may further decrease.

In general, the weak demand for pre-holiday stocking at downstream factories leads to insufficient market trading activity, although PP producers actively adjust prices to cope with potential inventory pressure. Moreover, traders’ inventory has accumulated during the week, and the complexity of inventory management is further increasing. Next week, market players are recommended to focus on inventory accumulation during and after the Spring Festival holiday, which will have an important influence on the future commodity price trend.