PP: THE VALUATION IS HIGH, AND IT IS STILL A SHOCKING MARKET FOR THE TIME BEING

First, the recent market transactions have been weak, especially the current weaker basis and weaker spread are really not good signals. In particular, spot transactions have continued to weaken recently, and the basis has continued to weaken during the rebound. The short-term rebound may have come to an end. Of course, we must also see that the current market demand pattern is also changing over time. Therefore, even if there is an adjustment in the later period, it is by no means a pattern of continuous decline in the first half of the year. It should be regarded as a phase adjustment of a mid-term rise.

Second, In the past two month, there have been two centralized replenishments in the spot market, but none of them have provided substantial support to the market because the downstream procurement cycle has been prolonged and a low inventory operation mode has been adopted. 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. With the accumulation of orders for BOPP and other related industries and the possible return of the output of the automobile and other industries in the later period, the second half of the year should not be too pessimistic.

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 downstream demand of PP remains stable in the second half of the year, and the order execution period in the second half of the year will drive the recovery and strengthening of PP.


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