During mid-May 2025, Polypropylene (PP) prices across the Chinese market witnessed slight firmness, primarily driven by continued some supply constraints, lower inventory levels as a decline in operating rates which presented its effects on the prices during this week. While PP production in Mainland China showed some improvements, scheduled plant maintenance and a slight decline in utilization rates continued to shape the pricing dynamics, resulting in spot prices to gradually incline during the reviewed timeframe.

During the assessed time frame, China’s domestic PP production reached 751,300 tons, marking an increase of 2,700 tons (or 0.36%) compared to the previous week’s 748,600 tons. Despite this production growth, operational setbacks and curtailments surfaced such as the shutdown of a 300,000 tons/year line at Maoming Petrochemical and a 70,000 tons/year unit at Yanshan Petrochemical contributed to a 3.19% decline in average PP capacity utilization rates, which stood at 76.56%.  Major producer Sinopec’s PP utilization fell 1.34% to 80.24%. Additional shutdowns at Quanzhou Guoheng, China Coal Yulin, and Huizhou Lituo also weighed on output, collectively supporting a price increase of approximately 1.8% for PP during the week, by curtailing sport availability of PP in the market.

On the inventory side, PP stock levels significantly edged lower with the drawdown in inventory was partly attributed to earlier price reductions by independent sellers aimed at clearing PP stocks for Southeast Asian markets. Market insights revealed that China's commercial PP inventory declined by 4.61% month-on-month, while inventory at production enterprises fell by 4.63% supporting the firmness at Ex-location prices. In contrast, inventories held by sample traders rose 3.66%, but sample port warehouse stock dropped by 6.50%, corroborating for the overall price increment.

Demand remained sluggish overall, particularly from downstream sectors such as construction, packaging, and automotive, which continued to witness weak procurement activity. However, the domestic plastic weaving sector saw a minor improvement, with the average operating rate of sample enterprises rising 0.4% to 45.7%. That said, the PP weaving continues to grapple with structural challenges, including overcapacity, intensified homogeneous competition, and thinning profit margins resulting in many small and mid-sized players resorting to curtail operating rates in order to sustain cash flow, further reflecting demand-side limitations.

Internationally, trade sentiment improved modestly after recent negotiations in Geneva. The U.S. announced a partial rollback of tariffs on Chinese goods for 90 days. During this period, Chinese products will be subject to a 30% total tariff—comprising a 20% fentanyl-linked charge and a baseline 10% on all U.S. imports. In return, China will lower tariffs on U.S. goods to 10% and pause certain non-tariff retaliations. The removal of retaliatory tariffs imposed on April 8–9, which had pushed rates up to 145%, opened a brief window for some PP sellers to lift their offers, which also reflected in this week’s pricing. This window is, however, only available for 90 days at present. The U.S. and China agreed to keep lines of communication open, following a call between senior officials late May 2025, signaling continued high-level engagement as both sides work toward a broader deal

From the cost side, PP production costs rose by 1% in mid-May, driven by tightening feedstock conditions. Propylene prices edged higher due to lower operating rates of Propane Dehydrogenation (PDH) units across Asia, which averaged 59.59% in May—down 2.7% from April. The decline was attributed to unfavorable financial conditions, which restricted regional propylene production and pushed feedstock prices upward, thereby increasing PP production costs.

As per anticipations, PP prices are expected to face downward pressure in June 2025. With the intensive expansion of PP production capacities in Q2, supply pressure is likely to intensify. Additionally, as the first half of 2025 nears its end, suppliers are expected to push for sales targets during audit season, potentially leading to greater volumes of lower-priced PP inventory circulating across the market.