MELT-SPRAYING CLOTH PRODUCTION CAPACITY GROWTH LED TO THE RAPID RISE OF PP PRODUCTS

Affected by the continued spread of public health events overseas, the demand for medical protection materials has surged.According to incomplete statistics, after the domestic increase of more than 30,000 mask manufacturers, far beyond the domestic melt-spraying materials and melt-spraying cloth production capacity growth.Under the high profit stimulation, part of the use of fiber material production "melt spray cloth" small equipment has been mounted, the price of fiber material short-term violence to pull up, driving other PP products quickly with the rise.

Under the stimulation of high profits, the upstream enterprises greatly increased the proportion of fiber production, and the proportion of PP wire production fell to 20.7%, a low value in recent years, which also makes the supply of standard products continued to be tight.Considering that may is about to enter the delivery month, the low production schedule of PP standard products also causes the market to worry about the shortage of delivery products, and the market speculation sentiment is heating up recently

Affected by the closure of the city due to the public health incident, some polyolefin production units in India were shut down at the end of march, including the 440,000 tons/year PP production line of MRPL and 680,000 tons/year PP production line of India petroleum.In terms of capacity, the recent shutdowns represent nearly 20 per cent of India's total capacity.From the perspective of import, the source of PP from India in 2019 is 120,000 tons, accounting for about 3.5% of the total import volume. Although the current production capacity shutdown has limited impact on the domestic market, the market is concerned that India is still in the early stage of the outbreak of public health events, and there is still the possibility of further deterioration in the later stage

Since the beginning of April, there has been little change in the operation rate of downstream plastic and braiding and BOPP. According to the market research, except for the concentrated replenishment behavior in some downstream, most of the downstream recovery sentiment has subsided and the wait-and-see sentiment is strong. In addition, the downstream profit has been significantly weakened recently, and it is expected that the construction will not be improved significantly in the later stage.In addition, the continuous deterioration of overseas public health events also has a great impact on the export of plastic products. Some foreign orders of plastic products are delayed or cancelled, and the demand for plastic products in the medium and long term is weak.

Operation strategy: in the short term, it is suggested that the multiple orders of PP09 in the early stage gradually leave the field and wait for the market. In terms of cross-species arbitrage, considering the valuation of PP09 and MA09 and the difference of the impact of public health events on the downstream demand, it is suggested that the price difference between PP09 and 3MA09 should be narrowed and suitable for intervention.In the medium and long term, the new production capacity at home and abroad has doubled this year compared with the same period last year, and the pressure of PP production is still huge. Besides, the sharp rise in the price of PP also makes it profitable to import, and overseas suppliers have increased their sales enthusiasm in China. We believe that the general pattern of PP oversupply has not changed.

Market review

In march, public health events abroad became more and more severe, first in Iran and Italy, then spread to the whole European region, and finally, a number of states in the United States declared a "state of major disaster", global energy demand worries, combined with the OPEC meeting broke up in discord, and the price of PP fell off a cliff.However, after entering April, the storm changed, the fiber material price suddenly pulled PP to the forefront, April 13 main contract even once stopped, leading the energy plate, we will analyze the evolution of PP in the future.

Fundamental analysis

1, fiber production surge, standard supply is tight

Affected by the continued spread of public health events overseas, the demand for medical protection materials has surged.According to incomplete statistics, after the year more than 30,000 mask manufacturers were added in China, the total number of mask manufacturers exceeded 100,000, far exceeding the production capacity growth rate of domestic melt-spraying materials and melt-spraying cloth.Under high profits stimulation, partially used fiber material in the production of "melt-blown cloth" small devices are built, so the fiber material suddenly standing on the tuyere, its difference with drawing material once more than 2000 yuan/ton, a sharp rise in the fiber proportion of production scheduling of production enterprises, some petrochemical enterprises and even for the first time to produce high melting means the fiber material, under the impetus of the wave production, domestic fiber material proportion of less than 5% by march quickly ascending to nearly 26%, the proportion of involving more than 8 million tons of production capacity.

However, the enterprise to produce fiber material seriously crowded out the standard product capacity.Data show that in March, the proportion of PP wire drawing production basically hovered around 30%, which has been at a historical low level. In April, the situation deteriorated further, and the proportion of production planning on April 9 dropped to 20.7%, which was a low value in recent years.Considering that may is about to enter the delivery month, the low production schedule of PP standard products also causes the market to worry about the shortage of delivery products, and the market speculation sentiment is heating up recently.

2. Public health incident in India has closed the city, and imports may be affected

From the perspective of import volume, the trend of import continued to increase in recent years, and in 2019, the import volume reached 3.4 million tons.From the point of view of the main source countries of import, the main sources of import goods are in the Middle East, southeast Asia and India.According to the operation status of the devices tracked so far, the polyolefin devices in the Middle East and southeast Asia are not affected for the time being, while the development of public health events in India is worthy of market attention due to its large population and poor health care.On March 24, India announced that, in response to public health incidents, it will implement a "city closure" mode across the country starting from March 25, 2020 for 21 days.According to official documents, commercial services, industrial production and public transport will be suspended across the country, except for some sectors that produce daily necessities and handle emergencies.

Affected by the public health event sealing city, on March 23, India announced closure of haier, and 1 million tons of PE device, on April 1, due to the logistics limited, India part of polyolefin production plant stop, including India MRPL its 440000 tons/year PP production line, India's oil 680000 tons/year PP production line, India's reliance is still normal production for the time being.In terms of production capacity, India has a polypropylene production capacity of 5.8 million tons, which is estimated to account for nearly 20% of total production capacity.From the perspective of import, the source of PP from India in 2019 is 120,000 tons, accounting for about 3.5% of the total import volume. Although the current production capacity shutdown has limited impact on the domestic market, the market is concerned that India is still in the early stage of the outbreak of public health events, and there is still the possibility of further deterioration in the later stage.

3. The downstream profit is worrying, and the subsequent demand is doubtful

With the basic control of domestic public health events, the starting load of small and medium-sized enterprises in the downstream has been increased, in which the starting rate of plastic weaving has been increased from 50% in early march to around 57% in early April. The starting rate of BOPP has been relatively improved, and the load has been basically maintained at 55%, which is close to the average level of the whole year.According to the survey, in early April, large enterprises in north China started work at 70% to 80%, and the orders were ok.Recent orders of some companies in east China are not good, mainly due to poor overseas demand and slow growth of export orders due to the spread of public health events abroad.Orders in sichuan and chongqing regions were reduced in April, and some orders appeared before the festival. However, the follow-up orders in April were weak and the starting load declined slightly.Although the downstream plastic and braiding, the price of BOPP also followed the rise, but the market order follow-up volume performance is not good, in addition to some of the downstream concentrated replenishment behavior, most of the downstream recovery mood subsided, the wait-and-see mood is strong, and the recent downstream profit significantly weakened, it is expected that the late start of a big improvement.

In addition, the continued deterioration of overseas public health events also hit the export of plastic products.According to customs statistics, in the first two months of this year, China's import and export of goods trade decreased by 9.6% year on year, of which the export in the first two months decreased by 15.9%, and foreign trade orders decreased significantly.In 2019, despite the adverse effects of the trade war between China and the United States, China's output and export of plastic products continued to grow, with the output reaching 80 million tons and the export reaching 14 million tons, accounting for about 18% of the total.From the perspective of major exporting countries, the United States and the European Union account for half of the total exports, and the United States and the European Union are the hardest hit areas affected by the public health event. Some foreign orders of plastic products are delayed or cancelled, and the demand for plastic products in the medium and long term may be weak.

Conclusion and operation

In general, PP this round of rebound on the one hand attributed to the oil price rebound can change the atmosphere of a good drive, on the other hand and fiber material strong pull inseparable.In the future, we may need to pay attention to the ratio of wiredrawing production and downstream demand. Currently, the continuous rise of PP price makes the downstream profit be compressed and the start of construction difficult to be improved greatly. Moreover, the continuous deterioration of overseas public health events also has a negative impact on the export of related plastic products.In addition, market sources said, the price of fiber material has attracted the attention of the market regulation, the relevant departments will be disturbing the order of melt-blown cloth market price check illegal behavior, not compliance mask manufacturers are expected to shut down gradually, this will boost fiber is expected to return to rational prices, in the short term, suggest early PP09 single more gradually on the sidelines, across varieties arbitrage, considering PP09 with MA09 performance valuation and the downstream demand, suggest PP09-3 MA09 narrowing of optimum machine to intervene.In the medium and long term, the new production capacity at home and abroad has doubled this year compared with the same period last year, and the pressure of PP production is still huge. Besides, the sharp rise in the price of PP also makes it profitable to import, and overseas suppliers have increased their sales enthusiasm in China. We believe that the general pattern of PP oversupply has not changed.

                                                                                                                                                              By Feifei