Polypropylene: How Does the Rise and Fall of Oil Price Affect Polypropylene? - Wenzhou Mou'an Packaging Co., Ltd.

Polypropylene: How Does the Rise and Fall of Oil Price Affect Polypropylene?

Recently, affected by the emergency Suez Canal waterway blocked, international oil prices rebounded rapidly on Thursday. However, the failure of the Suez Canal waterway rescue did not continue to support the oil market. Traders were concerned about the impact of the worsening epidemic situation in Europe and India on demand, and international oil prices fell sharply again.

The relationship between oil cost and polypropylene price

The price of crude oil and polypropylene always has strong linkage, so when the oil price changes, it will also affect the price of polypropylene. The influence of crude oil on polypropylene is mainly reflected in two parts. First of all, the production capacity of oil-based polypropylene in China accounts for about 54%. The fluctuation of crude oil price causes the cost change of oil-based polypropylene to a large extent. However, with the diversification of polypropylene raw material sources, the direct impact of crude oil on the cost side of polypropylene is weakened. Secondly, due to the influence of mentality, as crude oil is the direct upstream raw material of many bulk commodities in China, the fluctuation of crude oil can easily cause the shock of domestic bulk commodities and aggravate the worry atmosphere of the market. There is no lack of polypropylene market, and the continuous rise or fall of crude oil has a greater impact on the polypropylene market.

The influence of polypropylene price

In addition to the cost side, the market is more affected by the fundamentals, as well as the changes of market mentality brought by futures. Recently, the domestic polypropylene price trend was affected by the futures, which fell below the 9000RMB/TON mark on the 23rd and continued to run in shock. In terms of fundamentals, the new production capacity of the supply side will also have a certain impact on the market. On the demand side, affected by the previous PP price rise, the downstream profits were squeezed, and the cost transmission was difficult to complete in the short term, which affected the follow-up efforts. As a result, the spot market prices fell again and again, and the trading situation was also shrouded by the cloud. The downstream terminals had a wait-and-see mentality and operated cautiously. In order to alleviate the pressure of inventory and turnover, traders made more profits and delivered more goods, and the overall price center continued to fall. End users such as PP woven bag manufacturers only purchase according to the rigid demand, but they are not willing to stock up.

In the short run, although there are emergencies, they only affect the short-term fluctuation of crude oil price. In the long run, based on the consideration of fundamentals, the oil price may continue to return to the weak consolidation trend, and the cost support for polypropylene will be weakened. On the other hand, in terms of the fundamentals of polypropylene itself, although the maintenance plan of the supply side is coming one after another, the smooth commissioning of new units and the release of output will make up for part of the maintenance loss and reduce the supply gap. In terms of inventory, the upstream petrochemical enterprises slow down the pace of destocking, and the social inventory gradually accumulates. Although the overall inventory level is acceptable, there is also some pressure. On the demand side, downstream factories still have limited acceptance of high prices, and their enthusiasm for placing orders has weakened. Although the terminal is actively conducting cost transmission, the progress is slow. Before it is fully transmitted to the price, it is difficult to improve the trading situation and maintain the rigid demand. On the whole, the domestic polypropylene market may continue to be weak and keep a wait-and-see trend.

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