China’s PP markets struggle to hold gains amid mixed signals

China’s PP markets saw limited movement this week, with a fragile recovery losing steam amid softening futures and persistent oversupply. Last week’s optimism, sparked by temporary tariff reductions and a brief round of restocking, began to wane as market participants faced the realities of stagnant demand and rising production capacity. While sentiment had initially improved due to policy easing and firmer prices, traders now report a lack of follow-through, with prices mostly flat or edging slightly lower both domestically and in export markets.

Local sentiment improves, but gains unsustainable

In the local market, traders noted improved sentiment following the temporary tariff cut and some short-term maintenance activities at domestic plants, which provided brief upward momentum to spot prices. Some downstream buyers responded with moderate restocking, helping to lift transaction volumes earlier in the week. “There are more buyers asking for offers and purchasing for basic needs,” one trader said, adding that PP’s performance currently appears stronger than PE.

However, the overall market tone remains cautious. Traders pointed to declining Dalian futures and continued oversupply, with operating rates at PP plants remaining steady. The expected addition of 1.4 million tons of new capacity over the next two months is also weighing heavily on sentiment. “We are entering a seasonal demand lull, and supply is still long,” a trader commented, suggesting that any price rebound will likely be short-lived.

A domestic manufacturer echoed the conservative stance, noting that while prices rose briefly last week, they have since stabilized. Orders have remained unchanged compared to previous weeks, and procurement continues to be limited to essential volumes. The short-term outlook is for prices to remain flat or experience only slight increases, mostly driven by policy-related sentiment rather than actual demand growth.

Brief gains for exports reversed by buyer pushback

In the export market, Chinese PP sellers initially tested the waters last week with modest price increases amid improved sentiment. Homo-PP raffia offers reached $900–930/ton FOB due to stronger yuan and domestic gains. However, the momentum quickly faded as buyers in key regional markets pushed back against higher offers. “Import offers dropped by $10-30/ton this week, and day by day,” a Vietnamese trader reported, noting that buyers were only willing to accept lower levels.

This price resistance reflects the broader weakness in international demand. Despite some improvement in trade sentiment, end-user consumption remains sluggish, and overseas buyers are wary of any price hikes amid ongoing macroeconomic uncertainties. A Chinese trader remarked that despite the tariff reduction, export demand failed to pick up meaningfully, and the strengthening of the RMB only made Chinese cargoes less competitive.

With regional markets showing little sign of recovery, Chinese sellers may face increasing difficulty in offloading excess supply through exports. As a result, the export market is expected to remain under pressure unless new demand drivers emerge or global economic conditions stabilize.

No support from costs

Upstream, the feedstock situation has not provided any meaningful support to prices. Brent crude rose by nearly 1% week-on-week, but this modest gain was not enough to shift sentiment, particularly as spot propylene prices on a CFR China basis held flat at near two-year lows as of May 19.

Meanwhile, Dalian PP futures fell by CNY90/ton ($12/ton) over the last two sessions, undermining trader confidence.

With feedstock costs remaining largely stagnant and futures trending downward, there is little cost-push incentive to support PP prices. As such, traders are looking more toward macroeconomic cues and government policies for direction in the near term.

Outlook: Stability at best, risks remain

While the recent tariff adjustments and short-term restocking brought a temporary lift to China’s PP market, the underlying fundamentals remain weak. Supply continues to outpace demand, and the expected capacity expansion looms large over both domestic and export markets. With feedstock prices offering no substantial support and international demand still soft, the PP market is likely to remain flat or mildly bearish in the near term, depending heavily on sentiment rather than sustained structural improvement.