In 2021, the bull market of China's polypropylene market opened, and the market continued to rise, largely due to the support of increased export volume. At present, polypropylene export arbitrage space is shrinking, and there is a shrinking crisis in export, but even so, domestic polypropylene still has good support.
Key words: polypropylene, export
After the continuous rise after the Spring Festival, the domestic polypropylene market is in a high shock stage. In the short term, the market is still in a high position. The main reason is that the current market supply and demand pattern is relatively healthy. In addition to the stable downstream construction and just need support, the high market price is also benefited from the growth of export volume.
Export boost bull market
After the Spring Festival in 2021, the domestic polypropylene export market is hot, and the export volume has increased significantly. According to statistics, since the Spring Festival, the domestic polypropylene export volume has reached 450000 tons. It is estimated that the export volume of polypropylene in the first quarter of 2021 will catch up with and surpass the total export volume of polypropylene in 2020. In recent years, with the continuous expansion of domestic polypropylene production capacity, the export volume of polypropylene shows a small growth trend. However, in terms of total volume, the export volume of polypropylene in China is relatively small. In 2020, the domestic export volume of polypropylene will reach 364000 tons which includes all bags made by pp woven material, likerice bags, animal feed bags,fertilizer bags etc. Accounting for 1.21% of the total domestic supply of polypropylene, accounting for a very small proportion.
Demand and arbitrage space stimulate export
However, in 2021, the export volume of polypropylene will increase significantly, mainly due to the opening of arbitrage space and the recovery of foreign demand. First of all, due to the extremely cold weather in North America after the Spring Festival, a large number of plants were shut down, and later the Middle East ushered in a large area of plant maintenance, which led to the tightening of overseas regional supply, leading to a sharp rise in prices, opening up arbitrage space for domestic polypropylene export. Secondly, the recovery of demand, benefited from the global vaccination, overseas demand is in the recovery stage, good demand with tight supply, once again stimulated the substantial increase of China's polypropylene export volume.
The arbitrage space narrows, the export deposit shrinks crisis
The existence of arbitrage space is an important factor to stimulate exports to improve, but recent statistics show that arbitrage space has been reduced, and the external supply is facing recovery in the later stage, so there is a crisis of export reduction. At present, the Middle East and North America may gradually complete the restart of parking devices in mid April, China's export share to South America will gradually reduce, and the overall export trade consideration will gradually change from overseas centralized procurement to sporadic order procurement. Although there is obvious profit margin for overseas prices, China's export volume may be difficult to maintain the previous high level.
Domestic maintenance comes one after another and continues to support the market.
Domestic market, there is still no lack of good support. According to statistics, up to now, according to the calculation of the units with maintenance plan, the maintenance loss of polypropylene unit is expected to be about 240000 tons in April, excluding the accidental shutdown device. According to the practice in previous years, the centralized maintenance of production enterprises is mainly concentrated in May to June in the first half of the year and July to August in the second half of the year. According to the research from Mornpackaging, at present, most manufacturers intend to arrange maintenance in May. According to the current data, there is a significant increase in device maintenance in April, which will further ease the market supply pressure and find another support for the market.
Demand can still be supported
Last year, the second quarter was the relative peak season for the overall demand of polypropylene downstream. Although the seasonal demand performance of the market has weakened, the second quarter is still the relative peak season for PP woven bags and woven polypropylene fabric. In 2021, the overall level of downstream construction will be better. First of all, because the government encourages the local Chinese new year, the downstream construction will be better during the Spring Festival. At the same time, the downstream orders are better, the downstream rework is earlier after the festival, and the demand is better. At present, the overall starting level of the lower reaches tends to be stable. Even if the raw materials are high, the overall starting level of the lower reaches has not declined, and the demand is still there, which has strong support for the market.
On the whole, the recent market high has fallen, mainly due to the cautious attitude of the downstream, the slowing down of the procurement of goods sources, and the lack of follow-up, which hindered the market upward. At the same time, combined with the shock adjustment of crude oil, the polypropylene market high has fallen. But on the whole, the supply and demand of the market is still relatively healthy, especially under the support of export demand. For a long time, with the recovery of overseas installations and supply, domestic exports are facing a crisis of shrinking. However, there is still no lack of support in the domestic market. The relatively stable downstream start-up and the subsequent maintenance will give the market support again. Overall, after the short-term correction of the market, there is still no lack of support or rally.