Will Q2 turnarounds mitigate oversupply in China’s PP, PE markets?

China’s PP and PE markets are poised to undergo a busy maintenance schedule during the second quarter of 2024, which could potentially counterbalance the existing oversupply situation amidst a lack of substantial recovery in demand. This coupled with increased export activity, particularly for PP, has bolstered sellers’ optimism, suggesting potential market support in the coming quarter despite persistent demand challenges.

Since late last week, sentiment has faltered for both PP and PE in China, with prices of the latter even experiencing downward corrections for the first time since early December. At the same time, China is preparing to introduce new capacities for both products this year, although it remains uncertain whether these plans will proceed as scheduled given the prevailing supply pressure domestically.

Domestic markets oversupplied since end of CNY

Local inventories have remained ample since the end of the Chinese New Year in February, as the destocking activities have been considerably slow given sluggish downstream markets.

After the holidays, the two major Chinese producers’ combined polyolefin inventories were standing at 990,000 tons on February 18, indicating a sharp increase of 78% from the pre-holiday levels.

As of March 14, the total inventories were reported at 880,000 tons, indicating a sluggish pace of replenishment by converters post-holidays. “Overall demand has remained weak. Supply pressure has become more evident lately because of increased operating rates, which resulted in production expansion,” a player noted.

Will upcoming turnarounds help ease supply overhang?

The domestic supply overhang is expected to be alleviated soon, as the second quarter will see a slew of scheduled maintenance shutdowns at both PP and PE plants in China.





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