PP：Rising nicely, but don't rush to get carried away

PP: Rising nicely, but don't rush to get carried away

On August 17, PP spot prices rose directly by 100-200 yuan per ton, with the main quotation for East China's drawn film reaching 9,050-9,250 yuan per ton. This marks a rebound of over 1,500 yuan from the year's low point. 

Overnight overseas markets saw renewed geopolitical tensions. With the U.S.-Iran ceasefire agreement expiring without renewal and lingering effects from the recent tanker attacks in the Strait of Hormuz, WTI crude surged 2.55% to $84.5 per barrel, while Brent crude climbed above $90.87 per barrel. The cost-side fire shows no signs of abating anytime soon. Although the market looks attractive, the driving force behind the price increase still lacks any clear link to demand.

① Geopolitical tensions have intensified again, raising shipping risks in the Strait of Hormuz and increasing crude oil premiums, providing short-term support on the cost side; ② Inventory levels across the supply chain remain at historically low levels, leading to tight availability of spot tradable resources; ③ Futures prices had previously traded significantly below spot prices, and as the delivery window approaches, strong upward correction momentum is expected, which in turn boosts sentiment and supports the spot market.  Three converging forces have driven prices higher, with a clear logic behind it. Yet feedback from downstream segments of the supply chain paints a different picture. 

Although BOPP film factories have raised prices by 100–150 yuan, end users remain cautious, with limited actual orders and clear resistance to high-price transactions. Plastic woven bag production rates continue hovering around 40%, with all sub-sectors operating at year-low levels. Downstream raw material inventories are generally low, yet there is little interest in buying to replenish stock; the prevailing trend remains purchasing only as needed.

A price rally lacking demand support rests on shaky foundations. 

Looking at the supply side, concentrated equipment maintenance and low operating rates in August constitute the core factor supporting the current tight spot supply. However, this supportive factor is weakening marginally. National commercial pp inventory has climbed to 524,600tons, a month-on-month increase of 3.59%, meaning social inventory pressure is building up. Some overhauled production units will resume operation one after another, so supply growth is highly certain starting in September. The new 450,000-ton-per-year production facility of china coal Yulin phase2 is scheduled to launch production in September, and the pressure brought by new capacity release in the fourth quarter will remain a medium-to-long-term bearish factor hanging over the market.

Geopolitical factors are adding momentum, while fundamentals are pulling back. These two forces are in constant tension, resulting in highly volatile market conditions. Once the geopolitical premium fades and the risk premium on crude oil quickly recedes, prices will revert to the weaker underlying industrial fundamentals. In the short term, low inventories combined with cost support may sustain a sideways-to-upward trend. However, the current rally is more driven by temporary factors than a fundamental shift in demand. No one knows how long the geopolitical fire can burn, but the fundamentals card will eventually be revealed.