China PP Market Firms as Costs and Supply Tightness Support Prices

China’s PP market has shown mixed movements in recent weeks, with bullish and bearish factors frequently shifting the direction of prices. Volatile crude oil futures, driven by geopolitical tensions in the Middle East, have created uncertainty over production costs, while weak seasonal demand continues to limit upward momentum.

Supply conditions have provided some support through low inventories and ongoing plant maintenance. As a result, sellers have followed different strategies, with some offering discounts to encourage purchases while others have maintained firmer prices to recover higher costs.

At the beginning of this week, stronger upstream costs and tighter availability have become the dominant factors, pushing PP prices higher despite limited demand.

Higher Crude Strengthens PP Cost Support

Upstream cost pressure increased sharply this week as developments in the Middle East pushed crude oil futures higher. Brent crude settled above $87/bbl on Tuesday, August 10, almost 11% higher than its settlement a week earlier, and remained close to that level during trading on August 11.

CFR China propylene prices, however, have reacted more moderately. According to the ChemOrbis Price Index, spot propylene values have remained broadly stable over the past two weeks and so far this week.

September PP futures on the Dalian Commodity Exchange also responded to the stronger crude market, rising by CNY199/ton ($29/ton) during the first two trading days of the week, although prices were still lower compared with the previous week.

The combination of stronger crude and supported feedstock costs has raised the PP cost floor, reducing producers’ willingness to offer significant discounts. A trader reported that both domestic and imported PP prices increased this week as firmer crude and futures provided support. Typhoon-related logistics disruptions and temporary plant shutdowns also contributed to the tighter supply situation.

Another trader, however, pointed out that feedstock prices remain unusually high for this time of year, putting pressure on downstream margins and limiting buyers’ willingness to purchase.

Market attention has also shifted toward possible disruptions to energy supplies, particularly around the Strait of Hormuz. Ongoing tensions involving the Strait, Yemen and Saudi Arabia, together with the absence of an agreement between the US and Iran, continue to add uncertainty to the energy outlook.

Tight Supply Supports Prices Despite Weak Demand

Supply-side restrictions have helped offset the lack of strong buying interest. The temporary shutdown of Phase 2 at Ningbo Donghua Energy, slightly higher PP maintenance activity and disruptions caused by the typhoon have reduced availability in some regions. Additional planned shutdowns are also expected to temporarily limit production.

Low inventories across the supply chain have provided further support. A producer source noted that maintenance remains widespread across China, keeping operating rates relatively low and making certain PP grades less readily available.

These conditions have allowed spot prices to remain firm even though buyers are largely purchasing only according to immediate requirements.

Demand remains the biggest limitation for a sustained price recovery. Downstream producers have not significantly increased operating rates, while existing inventories have yet to be fully cleared. Despite the approaching traditional “Golden September” demand season, meaningful restocking has not yet emerged.

Several market participants reported that downstream demand remains subdued, with one end-product manufacturer seeing no clear recovery and another reporting little improvement in end-user consumption.

Some downstream sectors have shown modest improvement, but the overall demand picture remains weak. With crude oil and futures providing cost support while supply stays relatively tight, sellers may continue to defend current price levels.

For the near term, China’s PP market is therefore expected to remain relatively firm but volatile, with limited demand likely preventing a strong upward move and keeping prices within a narrow range.

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