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Insight | Time:Apr 4 2018 2:55PM
PP stock pressure reduced with production switched to non-commodity-grade
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PP market has been declining for around two month, and finally stabilizes and rebounds slightly in end-Mar. Price for commodity-grade homo PP raffia has slumped by 900yuan/mt or 9.5% during end-Jan till end-Mar.

As shown in below table, apparent stock pressure for PP and PE together (stocks recorded in petrochemical plants, coal-chemical producers and private companies) has been relieved evidently since early Mar. For PP alone, non-commodity-grade (other than homo PP raffia) sources have tightened till end of Mar, and sales of injection-grade PP have been stopped in some markets due to lack of stocks.

PP & PE inventory (kt) Sinopec & PetroChina groups Private and coal-chemical plants Total
2018-3-1 930 376.5 1306.5
2018-3-19 980 342.5 1322.5
2018-4-3 870 258.5 1128.5

Price trends divide between commodity-grade and non-commodity-grade PP
Non-commodity-grade PP performance is evidently stronger than commodity-grade PP, and that is also proven by recent widening price gap, especially gap between homo PP raffia and co PP.

Strengthening of non-commodity-grade PP has reflected related consumption improvement, and tightening fundamentals of the products. See recent stock reduction in overall PP market, the pressure has been removed moderately and thus supported a mild price rebound in end-Mar and early Apr.

Plants switch production, reduce commodity-grade PP production
Given the divided price trends of commodity-grade homo PP raffia and injection & co PP, domestic PP plants have actively switched production to non-commodity-grade PP production. (Below chart presents falling proportion of raffia grade and rising rate for injection grade.) Ningxia Baofeng has switched its 300kt/year PP production to co PP injection K8003, and Pucheng Clean Energy has shifted production of its 400kt/year plant to homo PP injection HP500N. This action is motivated by higher profits of non-commodity-grade product, and helps relieve raffia-grade supply pressure. For around one week, the price gap between non-commodity-grade PP and commodity grade has been pegged between 100-150yuan/mt.

PP market after Fresh Green Day holiday
Till Apr 4, the day before the three-day holiday during Apr 5-7, total plastic inventory in Sinopec and PetroChina groups have reduced to 850kt, and the rate is expected to be accumulated to slightly above 900kt afterwards, as transaction is almost halted while production activities continue. Price rebound has stopped on Apr 4, as downstream has prepared enough stocks for short-term production. Based on the observation of downstream performance recently, it is hard for them to procure in abruptly large volumes.

Company Capacity (kt/year) Operating rate Time for turnaround
Shaoxing Sanyuan 200 80% each for one week by turns since mid-Apr
300 80%
PetroChina Sichuan PC 450 100% 60 days since Apr 8
Ningbo Fund 400 112% one month since Apr 25
ZRCC 200 108% 45 days since Apr 27
300 108%
Shenhua Yulin 300 100% 20 days since Apr 5

In Apr, there will be number of plants to be shut for scheduled turnaround. Currently, production activities of Shenhua Ningxia Coal Industry II (600kt/year), Datang Duolun 1# (230kt/year), West Pacific Petrochemical (150kt/year), Qinghai Yanhu (160kt/year) and Changzhou Fund (300kt/year) are already suspended.

According to the schedules, the shutdowns will take effect Apr 20-May 20, and before Apr 20, PP plants would still mainly focus on destock, until PP inventory is safely reduced to a low level. In this process, market is likely to repeat narrow rise and fall circle, with price wave upward or downward around 200yuan/mt.
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