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Homo-PP downturn in full swing in China

by Pınar Polat -
  • 25/11/2021 (02:18)
In China, the downward trend in the homo-PP markets that kicked off around mid-October has been persisting, with the weekly averages of import and local homo-PP raffia and inj. prices respectively losing 6% and 15% since then , based on ChemOrbis data.

After the peak season in the September-October period, demand has tapered off as buyers have either refrained from fresh purchases or sourced based on their needs.

Lower coal futures and spot coal prices after the government intervention, as well as the pressure from new capacities across Northeast Asia, particularly in China, have also kept PP markets bearish.

Local homo-PP raffia and inj. prices have been assessed CNY50-150/ton($8-24/ton) lower from last week to currently stand at CNY8350-8550/ton ($1158-1186/ton without VAT) on an ex-warehouse China, cash including VAT basis.

The overall range for import homo-PP raffia and inj. prices have been assessed flat to $10/ton lower from last week to currently stand at $1160-1200/ton CIF China, cash basis.

Buying interest yet to respond to recent Dalian gains

January PP futures on the Dalian Commodity Exchanged have increased a total of CNY179/ton ($28/ton) during the settlements on November 23-24.

A few traders commented, “PP futures have trended higher but the market has remained quiet. Players are mostly adopting a wait-and-see stance or just buy on a need basis only. I think it is difficult to see a reversal in PP prices over the near term considering thin demand and concerns about excess supply.”

Oversupply concerns grow on new capacities

Apart from the lack of support from the demand side, Chinese PP players are also facing an oversupply situation amid new capacities over the near and longer-term.

Production News Pro shows that an additional PP capacity of 1.2 million tons in China is expected to come online in December. The total new PP capacities set for the final quarter of 2021 are slightly above 2.2 million tons while around 15 million tons of new PP capacity was planned to have been added for the full 2021.

Capacity additions in early-2022 are likely to exert even more pressure on PP markets. In the January-April period next year, the country is expected to house around 1.6 million tons of more new PP capacity.

China to step up PP exports further

China’s growing PP capacities have already pushed sellers to ramp up exports. According to ChemOrbis data, China exported more than 1 million tons of homo PP in the first ten months of 2021, which marks as a record-high level tripling the full exports of 2020. The main destination to relieve the stock pressure was Southeast Asia, needless to say.

Considering the logistic hurdles and shipping snarls that caused freight rates from China to rise as high as 400-500% on year, China’s exports have been sapped in 2021 despite the sharp increase in PP stats. As freight rates have started to come off their peaks - and assuming that they will continue to ease - this may also help Chinese sellers regain competitive edge in far destinations throughout 2022. That is to say, China will be far more pervasive in global PP markets with a more considerable jump in exports next year.
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