Chinese Polypropylene Prices tumble as the Pandemic disrupts Demand-Supply Equilibrium

Polypropylene (PP) spot prices in China have been on a downward spiral in the Asia Pacific region as demand continues to be impacted by lockdowns and the consequent disruptions in supply chain at a global scale. Manufacturing and trading activity at major Chinese Industrial and commercial centres such as Shanghai and Guangzhou have been affected due to strict lockdowns and quarantine measures being adopted by the Chinese Government.

Although feedstock propylene market witnessed a hike in price of around 2.5% since the beginning of April, the PP market had been rather inelastic to the fluctuations in its upstream market. Chinese C3 value chain is witnessing peculiar market dynamics where Propylene market trend has been largely inelastic to both the upstream PP and downstream Naphtha and propane markets. This non-synchronicity could be attributed largely to the supply chain disruption caused by the recent surge in covid 19 cases in China and the lock downs that followed suit.

Import shipments from South Korea continue to face delays due to congestion at major container terminals of China. The consequent supply tightness in the resin market did not impact the prices as lockdowns have rendered downstream demand from the processors and compounders at lows in the first quarter of 2020. Copolymer availability was relatively tight compared to homopolymer in the second half of April. Prices of Homopolymer Injection for the third full week of April were assessed at USD 1285/Mt on an EXW Dalian basis while Random Copolymer import prices were assessed at USD 1495/Mt on a CFR Shanghai basis.

Polypropylene prices for the month of May could be lower on account of an expected fall in the prices of upstream value chain with crude oil prices expected to fluctuate in the range of USD 87/bl to USD 105/bl for May. Although LNG prices have been on a rise since the mid-first week of April due to supply tightness and delayed cargoes, utility costs are likely to ease up in the month of May as Chinese markets and logistic companies adapt to the lockdown economy and the disruption in supply chain becomes less and less frequent.