China PP Rally Strengthens as Rising Oil and Tight Supply Support Prices

China’s polypropylene (PP) market has maintained its upward trend since early August, with the pace of gains accelerating over the past two weeks. Market participants reported sharper increases this week across domestic, import and export segments. Import offers rose by up to $70/ton, export offers increased by as much as $100/ton, while domestic prices climbed by up to CNY300/ton ($45/ton) from last week.

The rally continues to receive support from higher crude oil futures, firm propylene prices and tight material availability. However, expectations of improving supply and only modest recovery in downstream demand are limiting the upside, with trading activity yet to accelerate significantly.

Higher Feedstock Costs Lift PP Prices

Rising feedstock costs remain a key driver of the market. Crude oil futures continued to strengthen, while spot propylene prices remained firm at more than three-month highs. Brent crude futures were also trading above $98/bbl during Tuesday’s intraday session.

Price increases were reported across major market segments. Import offers rose by as much as $70/ton, export offers by up to $100/ton, and domestic prices increased by up to CNY300/ton ($45/ton) compared with the previous week.

Market participants also pointed to continued support from higher freight costs, limited Middle Eastern availability and firm offers from Southeast Asian suppliers, adding further pressure to imported PP prices.

Tight Supply Supports Market Despite Weak Demand

Supply remains relatively tight due to concentrated plant maintenance and lower inventories. However, several PP units are expected to restart, which could gradually improve availability. Limited Middle Eastern supplies and relatively low downstream inventories are providing additional support to prices in the near term.

Demand has shown some improvement, with major downstream producers receiving sporadic new orders and slightly raising operating rates. Nevertheless, the recovery remains modest.

High feedstock costs are also discouraging buyers from increasing purchases, keeping transaction volumes from rising substantially. Market participants expect limited demand improvement to cap the upside, even as tight supply, low inventories and elevated crude prices continue to support the market.

With ongoing US-Iran geopolitical tensions adding uncertainty to global crude supply, market participants see limited room for PP prices to decline in the immediate term.

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