The Global PP Market Faces Multiple Challenges!

Oct 09, 2022

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Concern about oversupply of PP in Asia

Market insiders of S&P Global said that due to the oversupply of polypropylene resin in the Asian market, capacity will continue to be expanded in the second half of 2022 and in the future, and the epidemic situation is still affecting demand. The Asian PP market may face challenges. For the East Asian market, S&P Global expects that a total of 3.8 million tons of new PP capacity will be put into use in East Asia in the second half of this year, and 7.55 million tons of new capacity will be added in 2023. Market sources pointed out that under the continuous congestion of ports in the region, due to epidemic restrictions, several production plants were delayed to put into production, thus doubting the reliability of production capacity. The source said that if the oil price remained firm, East Asian traders would continue to be optimistic about export opportunities to South Asia and South America. Among them, China’s PP industry will change the global supply pattern in the short to medium term, which may be faster than expected. Given that Singapore has no capacity expansion plan this year, China may eventually replace Singapore as the third largest PP exporter in Asia and the Middle East.

In the second half of the year, Southeast Asia’s PP market will continue to oversupply, because the purchasing power is still weak after the epidemic. Moreover, inflation will also reduce the purchasing power of consumers. It is difficult for PP end product manufacturers to pass on additional costs to consumers. PP price pressure in Southeast Asia is expected to continue. In addition, competitive intra regional pricing, lower price exports from outside and the rebound of project load rate in this region will affect the PP price in Southeast Asia. In terms of capacity, PETRONAS’ PRefchem project of 450000 t/a PP project is planned to restart in the second half of the year; Vietnam’s Longshan Petrochemical Plant is also planned to be put into production in the first quarter of 2023, including a set of 400000 t/a PP plant. S&P Global pointed out that due to weak demand, Southeast Asia will seek more export opportunities outside of Southeast Asia, including those to Europe, South America and South Asia, because export earnings to these regions are much higher.

North America pays attention to the decline of propylene price

The source said that the PP market in the United States in the first half of the year was largely plagued by continuous inland logistics problems, lack of spot pricing and uncompetitive export pricing. The US domestic market and export PP will face uncertainty in the second half of the year, and market participants are also paying attention to the possible impact of the hurricane season in the region. At the same time, although the US demand has steadily digested most of the PP resin and kept the contract price stable, market participants are still discussing the price adjustment due to the decline of spot price of polymer grade propylene and the reduction of resin buyers. S&P global data shows that from January 3 to May 18, the spot export price of US PP resin rose by 507 US dollars/ton to 1852 US dollars/ton, an increase of more than 27%, and an increase of more than 5% since the beginning of the second quarter. With the increase of the load rate of the new 450000 t/a capacity of ExxonMobil in Baton Rouge Complex in Louisiana by the end of this year, it is expected that the supply of PP in the United States will increase. In addition, InterPipeline Canada plans to put its 525000 t/a PP plant in Alberta into operation in 2022. Nevertheless, North American market participants remained cautious about the increase in supply. Due to lower external PP prices, the new production in North America last year did not make the region more competitive than traditional import regions such as Latin America. In the first half of this year, due to force majeure and maintenance of multiple sets of devices, the suppliers almost did not provide spot quotations.

European PP market is impacted by upstream

For the European PP market, S&P Global said that upstream price pressure seemed to continue to trigger uncertainty in the European PP market in the second half of the year. Market participants are generally worried that downstream demand may still not be strong, and the demand of automobile and personal protective equipment industry is weak. The continuous rise in the price of recycled PP market may benefit the supply of PP resin, because buyers tend to turn to cheaper raw resin materials. Compared with the downstream, the market pays more attention to the rising upstream costs. In Europe, the fluctuation of the contract price of propylene, a key raw material, pushed up the price of PP resin in the first half of the year, and the enterprise tried to pass on the rise of raw material price to the downstream. In addition, logistics difficulties and high energy prices are also factors driving price increases. Market insiders said that the conflict between Russia and Ukraine will continue to be a key factor in the changes of the European PP market. In the first half of the year, there was no supply of Russian PP resin materials in the European market, which provided some space for traders in other countries. In addition, due to economic problems, S&P Global believes that the Turkish PP market will continue to encounter serious headwinds in the second half of the year.