PP: MARKET PRESSURE IS STILL HIGH

First of all, in the recent week low downstream enterprises continue to purchase process, the market price still failed to have a significant increase. In recent trading days the market buying finally exhausted, the recent market is likely to weaken again. Especially in the recent period of time, South China has once again restricted electricity, restricting downstream operations, resulting in downstream manufacturers being forced to reduce orders, and it is difficult to see continued expansion for the time being. Of course, it should also be noted that the current inventory structure of the whole industry low inventory, durable goods orders are better these are an important boost to the possible rebound in the third quarter.

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.

It is weak in the short term and still weak in the medium term. In the future, the pressure on the top of 09 contract is 8600, and the short-term support is at 8250 and 7800.


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