With a loss of 1,000 yuan per ton, polypropylene companies do not rule out suspending production and insuring prices

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As of August 11, the quotations from major domestic industries are 8,850 yuan/ton for high-end products and 8,000 yuan/ton for low-end products. The production cost of polypropylene is about 9,000 yuan/ton. The price of polypropylene has fallen this year, mainly because the demand for masks and protective clothing, which are anti-epidemic materials, has dropped significantly compared with the previous two years. The market demand for polypropylene is not as hot as in previous years. At the same time, many domestic polypropylene manufacturers have gradually put into production and supply the polypropylene production capacity they expanded in the past few years, resulting in an oversupply of products. Starting in 2020, the domestic epidemic has driven a surge in demand for anti-epidemic materials, especially meltblown cloth for masks. The price was once as high as 60,000 yuan/ton. The market was hard to find and drove up the price of polypropylene. At its peak, the price of polypropylene exceeded 13,000 yuan/ton. Since the beginning of this year, the supply of anti-epidemic materials has been stable, the demand for raw materials has continued to decline, and the price of polypropylene has subsequently declined. However, many large domestic companies are still optimistic about the polypropylene market and are expanding polypropylene production capacity. In 2021, domestic polypropylene production capacity will be 31.31 million tons, an increase of 11.19% compared with 2020. In 2022, domestic polypropylene is still in a new round of production capacity expansion period. The new polypropylene production capacity includes Zhejiang Petrochemical Phase II with a total of 1.8 million tons/year, Ningxia Runfeng with 300,000 tons/year, Zhenhai Refining and Chemical Phase II with 300,000 tons/year, Zhongjing Petrochemical with 1.2 million tons/year, and Jingbo Stone. Chemicals of 600,000 tons/year, etc., involving a total of 18 large petrochemical companies, with new production capacity of 7.13 million tons/year. If these planned new units are successfully put into operation in 2022, domestic production capacity is expected to increase to 37.94 million tons, an increase of 21.18% from 2021. The current production cost of polypropylene is around 9,000 yuan/ton, and the price of high-end products has exceeded this cost line. Moreover, the price of oil and natural gas has rebounded. The cost pressure of polypropylene is still relatively high. Many companies are producing at a loss to meet downstream demand. However, if the price continues to fall, companies will not rule out cutting production to protect prices. In the past two years, polypropylene production capacity has continued to expand. This means that the entire industry may undergo an industry reshuffle in the future, and some old production capacity will be replaced by emerging production capacity. From the supply side, the production load of polypropylene is already declining. As of August 10, there were 28 domestic polypropylene production lines shut down for maintenance, involving a total production capacity of 6.56 million tons, accounting for more than 20% of the total production capacity. On August 10, Donghua Energy's Ningbo Line 1 (400,000 tons/year) and Yanshan Petrochemical Line 2 (70,000 tons/year) were shut down, and the maintenance time was planned to be one month. It is worth noting that the production lines of some companies with larger production capacity have also been shut down for maintenance, including the two lines of Zhejiang Petrochemical with a total production capacity of 900,000 tons, Shanghai Petrochemical with a production capacity of 200,000 tons, and Tianjin Bohai Petrochemical with a production capacity of 300,000 tons. At present, for polypropylene companies, especially those that are still expanding their production capacity, most of the new projects are integrated refining and chemical plants. Although the current loss per ton of the polypropylene industry is around 1,000 yuan, there are products in the upstream production line of polypropylene that have higher profits. Therefore, many companies use the profits from upstream products to subsidize polypropylene while reducing polypropylene production capacity. However, for polypropylene, due to the low overall inventory of domestic companies, prices will still have some support in the short term. According to industry data from Longzhong Information, as of August 10, the total domestic polypropylene inventory was 756,600 tons, a decrease of 20,900 tons from the previous period, a month-on-month decrease of 2.69%, and a slight decrease from last week. At the same time, downstream companies maintain rigid purchases, which will play a certain role in stabilizing polypropylene prices.