China PP Falters as Bearish Factors Take Center Stage, Though War Premium Remains Intact

China’s polypropylene (PP) market has come under increasing pressure this week as weak demand, declining futures, and softer feedstock costs weigh on sentiment. While domestic and export prices have eased from recent highs, the market still retains a large portion of the gains accumulated during the conflict-driven rally earlier this year.

Supply conditions continue to provide support. Producers have maintained reduced operating rates and extended maintenance schedules due to elevated production costs and limited profitability. As a result, spot availability remains relatively tight despite weaker demand across downstream sectors.

Industry data indicates that more than 1.3 million tons of PP production capacity is expected to be affected by maintenance shutdowns and output reductions during June. At the same time, polyolefin inventories held by major domestic producers have fallen below recent benchmarks, largely due to lower production rather than stronger consumption.

Demand, however, remains the market’s weakest link. Seasonal slowdown and a challenging economic environment have kept converters cautious, with most buyers purchasing only for immediate requirements. Downstream orders remain limited, making it difficult for processors to pass higher costs through the supply chain.

Meanwhile, cost support has gradually weakened. Propylene prices have trended lower for several weeks, erasing part of the earlier gains seen during the geopolitical rally. Although feedstock values remain historically elevated, the recent correction has reduced support for PP pricing.

Crude oil markets have also softened, adding further pressure to sentiment. The decline in oil prices has reinforced expectations that upstream costs may continue to ease in the near term.

China’s export PP market is facing additional challenges. Offers have moved lower as buyers across Southeast Asia remain cautious and maintain comfortable inventory levels. Competition from South Korean suppliers has intensified, with some cargoes offered at more attractive levels than Chinese material in key regional markets.

Vietnam has emerged as one of the weakest destinations, with sluggish demand and increased supplier competition limiting buying activity. The narrowing of the traditional price gap between China and Southeast Asia has also reduced export opportunities, making it harder for Chinese suppliers to secure fresh business.

Despite these headwinds, PP prices remain significantly above levels seen before the conflict-driven rally. Tight supply has so far prevented a sharper correction, but continued weakness in demand and growing export competition could place further pressure on the market in the coming weeks.

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