Although the current polypropylene market is still oversupply pattern, but in the production enterprises take the initiative to reduce production and downstream enterprises concentrated resumption of work under the background, the oversupply pattern not only did not deteriorate, but showed signs of improvement. It can be judged that yesterday's polypropylene futures price limit is mainly affected by the cost end.

raw material prices fell sharply

OPECFebruary report forecast 2020 global crude oil demand of 100.73 million barrels/day, non-OPEC supply of 66.6 million barrels/day, OPEC unconventional oil and gas and NGL production of 4.83 million barrels/day, OPEC crude oil production is 29.3 million barrels/day, and global crude oil supply and demand are balanced. In December 2019, OPEC announced an additional cut of 500,000 barrels per day on the basis of the previous production cut agreement, and then Saudi Arabia announced an additional cut of 400,000 barrels per day, that is, the OPEC cut of 772,000 barrels per day, and the output was no higher than 30.386 million barrels per day. In January 2020, OPEC's crude oil production was 28.859 million barrels per day, overfulfilling the production cut. If OPEC is able to maintain production at this level, the world will not have an oversupply of crude oil, but a shortage. Still, much of the decline in Opec production in January was caused by a drop in Libyan output, not the norm.

Not only that, at the end of February, the social public events gradually spread from China to Japan, South Korea, Italy and Iran and even the world, its impact on the global economy is inevitable, is bound to restrain crude oil consumption, and the global crude oil oversupply problem is further aggravated. This means that the global crude oil supply needs to achieve balance, OPEC must extend the production cut agreement, and further increase production cuts. The market had widely believed that there was a high probability that OPEC would extend the production cut for its own sake.

However, at last week's ministerial meeting, due to Russia's opposition, the output limit agreement was not reached in the end, and OPEC crude oil production will no longer be restricted in April. Affected by this factor, global crude oil prices fell by about 30%, breaking through the $30 / barrel mark, and the energy sector went down. Considering that the limit of polypropylene is only 4%, far from the bearish release of the oil price, it is expected that in the next few trading days, under the premise of no significant improvement in international oil prices, polypropylene futures prices will continue to fall.

Demand enterprises gradually return to work

Affected by social and public events, polypropylene downstream production enterprises are limited to return to work, and the operating rate is at a low level for a long time. However, with the improvement of the situation, it is a fact that the supply and demand pattern of polypropylene is good. First, as of March 6, the operating rate of plastic knitting, copolymerization injection molding, BOPP field was 45%, 63% and 51.9%, respectively, compared with February 7, respectively, up 13, 14 and 39.6 percentage points, downstream demand improved. Second, due to poor profits, recently, polypropylene production enterprises are concentrated to stop production. In the week of March 8, the maintenance of polypropylene production enterprises involved production capacity reached 4.44 million tons/year, and the operating rate fell 13.36 percentage points from the previous quarter. Third, with the decline in supply and the rise in demand, the inventory of two barrels of oil fell slightly.

The supply and demand pattern of polypropylene improved, but the upstream crude oil prices fell sharply, and the cost collapse became the dominant factor that the polypropylene price fell by the limit yesterday. Considering that the decline in oil prices is much higher than the decline in polypropylene, the subsequent polypropylene will continue to fall, to be digested bearish, and then choose multiple single bottom.

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