PP: TREND IS STILL WEAK

First of all, plastic woven bags, BOPP and other downstream demand sluggish is the key to the current market, even with peak maintenance and low inventory support. After the mid-April-mid-May downstream enterprises replenish their stocks, the market transaction is weak again, because without the support of the demand side, the market is difficult to sustain the expansion. Continued weakness in recent monthly spreads, increasing pressure on the market for forward contracts.

Second, the supply side of the first half of 2021 after April began to enter the peak maintenance period, but the new capacity pressure. It is expected that there will be about 15-18% of new production capacity put into the market throughout the year. On the supply side PP will increase significantly in 2021. A significant increase in supply will lead to a continued weak basis difference. Only after the expansion of demand in the second half of the year, the terminal industry to expand their own inventory levels, in order to gradually digest the current capacity pressure. Especially during the market rally in late April-early May, we see that the terminal industry has failed to follow the PP prices to climb significantly, and the downstream is obviously weaker than the polyolefin industry itself, which is not the pattern of a sustained rising industry. Therefore, we still define the current market as an oscillating market, which is a period of decline and will still rise after the third quarter.

Third, fiscal easing, monetary easing, and inflation are major trends, and there should not be too much hesitation. In the off-season of the first half of 2021, terminal demand will not be able to expand further, leading to a decline in terminal operating rates and reduced stockpiling, which may cause commodity prices to weaken in the second quarter. However, the inflation pattern in the second half of the year will continue to support commodity prices.

Short-term shocks, there will still be a decline in the medium term. In the future, the pressure on the top of 09 contract is 9000, and the short-term support is at 8300 and 8000.



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