China PP Market Lacks Direction as Holiday Demand Stays Weak

China’s polypropylene (PP) market is approaching the week-long National Day holiday without a strong directional trend. Tight supply and firmer futures are providing support, but weaker-than-expected pre-holiday demand is limiting price gains. Domestic PP prices have generally remained stable to slightly higher, while import values are mostly unchanged, with some market participants reporting modest declines amid limited trading activity.

The mixed sentiment follows last week’s crude-driven correction, which brought an end to the previous multi-week rally. Selling pressure has eased this week, while Dalian PP futures have recovered, offering some support to market sentiment. However, converters have shown limited interest in building inventories before the holiday, making it difficult for sellers to achieve broad-based increases.

Dalian Futures Recover but Spot Market Remains Mixed

January PP futures on the Dalian Commodity Exchange strengthened at the start of the week, gaining CNY104/ton on Monday and another CNY12/ton on Tuesday. The recovery helped improve sentiment after last week’s decline and allowed some domestic sellers to maintain or slightly increase their offers.

Chinese export prices have also shown resilience. Homo-PP raffia offers were reported stable to $20/ton higher than the previous week.

However, the physical market has not followed the futures rebound uniformly. Some traders and converters reported slightly lower domestic and Middle Eastern import offers, reflecting continued uncertainty in energy markets and reduced activity ahead of the holiday.

Tight Supply Continues to Support Prices

Supply remains an important source of price support. Around 26% of China’s PP capacity was reportedly offline, while operating rates remained relatively low. Limited feedstock availability and weak producer margins have contributed to additional maintenance and production reductions, restricting availability for some grades.

Low inventories are also helping sellers resist significant discounts. Combined PP and PE inventories at CNPC and Sinopec declined from 685,000 tons on September 28 to 660,000 tons on September 29, a reduction of 25,000 tons.

With selling pressure easing toward the end of the month, constrained availability has allowed producers and traders to defend relatively firm price levels despite weak demand.

Pre-Holiday Buying Falls Below Expectations

Demand remains the biggest obstacle to a stronger market recovery.

Some replenishment has taken place before the National Day holiday, but buying activity has been weaker than expected. High raw material costs continue to pressure downstream margins, while converters are finding it difficult to pass higher costs on to end-product buyers.

Consequently, most buyers are purchasing only for immediate needs, keeping transaction volumes low. Some downstream factories have also brought forward holiday shutdowns because of weak profitability and limited orders, further reducing their need for additional PP.

The subdued restocking contrasts with the stronger pre-holiday inventory buildup normally seen before an extended break, explaining why tighter supply and stronger futures have not translated into a significant spot-market recovery.

Import Market Remains Under Pressure

Import activity has also remained quiet. While most import prices are broadly stable, some market participants reported lower offers for Middle Eastern homo-PP and PP block copolymer injection grades as sellers encountered limited buying interest.

Chinese buyers are increasingly stepping away from the market ahead of the holiday, while many converters are comfortable with existing inventories and have little motivation to purchase additional material at elevated prices.

Import sellers therefore face conflicting pressures. Higher replacement costs and restricted regional supply discourage aggressive price cuts, but weak demand makes it difficult to secure deals at higher levels.

Crude Volatility Adds Uncertainty

Volatility in crude markets is adding another layer of uncertainty. Oil prices remain sensitive to developments surrounding the US-Iran conflict and potential diplomatic progress, causing rapid changes in market sentiment.

Brent crude fell $2.28/bbl to $104.32/bbl on Friday before recovering on Monday after US President Donald Trump rejected Iran’s proposed peace deal. November Brent settled 96 cents higher at $105.28/bbl on Monday and was trading around $105/bbl intraday on September 29.

Improved regional crude flows, with Middle Eastern exports reaching a post-war high in September, have meanwhile limited some of the upside pressure.

Against this volatile backdrop, Chinese PP participants remain divided. Tight supply and production costs support firm pricing, while weak holiday demand could create downward pressure. Both buyers and sellers appear reluctant to make significant moves ahead of the break.

Post-Holiday Demand Will Be Key

Trading activity is expected to slow further as China enters the National Day holiday on October 1, leaving PP prices likely to remain within a relatively narrow range in the final sessions before the break.

The key test will come after the holiday. Low inventories, reduced operating rates and constrained availability could support prices if converters return to replenish stocks. However, continued pressure on downstream margins and weak end-user demand could limit the strength of any post-holiday recovery.

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