As the first half of 2025 has passed, the PP market has experienced a downturn, showing an overall trend of fluctuations and decline. This variation in PP prices can be attributed to multiple factors, including the international environment, cost dynamics, and supply-demand relationships. In this report, we will review the PP market trends in the first half of the year and provide an outlook for the future.
Economic Frictions and Geopolitical Conflicts Increase Uncertainty in PP Market
During the first half of 2025, one significant influence on the PP industry has been the China-U.S. trade friction. The U.S. implementation of "reciprocal tariffs" has directly led to an increase in costs for PP-related exports from China to the United States. As exports faced obstacles, some companies were forced to shift to domestic sales, exacerbating the "internal competition" in local pricing. In April, the market saw a heavy "wait-and-see" sentiment from the demand side, primarily driven by selective purchasing, resulting in lackluster trading activity. In May, mutual tariff reductions created a temporary market sentiment-driven price rebound. However, in early June, an 11-day geopolitical conflict between Iran and Israel triggered panic about potential raw material supply shortages, further increasing PP production costs and pushing prices up in mid-June. Nonetheless, with the resolution of the conflict, PP prices gradually returned to the fundamentals.
Supply-Demand Imbalance as the Main Resistance to PP Price Increases
However, the fundamentals remain trapped in a quagmire of high supply and low demand. Throughout the beginning of 2025, new PP facilities continuously expanded their capacities, with notable additions such as Yulong Petrochemical (800,000 tons/year) in January, two lines from Inner Mongolia Baofeng (1,000,000 tons/year in total) in February and March, ExxonMobil in Huizhou (955,000 tons/year) in April, and Zhenhai's fourth line (500,000 tons/year) in late June. Recently, Yulong Petrochemical's fourth line (400,000 tons/year) is set to launch. As of the end of June, there was an additional 3.655 million tons of PP capacity, a 58.91% increase compared to the same period in 2024. Conversely, the demand side remains sluggish, with lower operating rates in downstream sectors, leading to an imbalance that puts further downward pressure on PP prices.
Weak Policy Support Amid Economic Slowdown
In today's environment of economic downturn, the trade war has further heightened concerns about a global economic slowdown, while fluctuations in the prices of major commodities like crude oil have amplified uncertainties regarding PP costs. Market pessimism regarding the macroeconomy has suppressed the purchasing enthusiasm of midstream traders and downstream enterprises, resulting in a "buy on the rise, not on the fall" sentiment. Although the government has introduced policies such as subsidies for small household appliances and new energy vehicles to stimulate consumption and boost related industries, the impact of these policies on the market tends to lag. Once the temporary market sentiment fades and returns to fundamentals, the PP market is likely to remain under pressure.
Future Outlook for PP Market
Moving forward, the PP market is expected to continue in a weakened state, possibly oscillating slightly. The global economic downturn has led to a prolonged 'wait-and-see' attitude in the market, compounded by the unpredictable tariffs imposed by the U.S. and the potential for further sanctions against certain European countries, which increases uncertainty on the cost side. In July, the supply side's production is set to increase again with CNOOC's Dasha project (900,000 tons/year) expected to commence operations in mid-July. However, the demand side may face reductions as persistent high temperatures due to the influence of the subtropical high-pressure system impact downstream factories, particularly in the plastic weaving and PP pipe sectors. Under the influence of various negative factors, the outlook for the PP market remains bleak, and we will continue to monitor its future trajectory.
