Melt blown cloth production capacity growth drives PP products to rise rapidly

Affected by the continuous spread of overseas public health incidents, the demand for medical protection materials surged. According to incomplete statistics, there will be more than 30000 new mask factories in China after the year, far exceeding the domestic production growth of melt blown materials and melt blown fabrics. Stimulated by the high profits, some small equipment using fiber materials to produce "meltblown cloth" have been launched one after another, and the price of fiber materials has risen violently in the short term, driving other PP products to rise rapidly.

Stimulated by high profits, the upstream enterprises greatly increased the proportion of fiber production, while the proportion of PP drawing production decreased to 20.7%, a low value in recent years, which also made the supply of standard products continue to be tight. Considering that may is about to enter the delivery month, the low production scheduling of PP standard products has also caused the market's concern about the shortage of delivery products, and the recent market speculation is heating up

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 PP production line of 440000t / a of mrpl and 680000t / a of PetroChina. From the perspective of production capacity, the capacity shut down recently accounts for nearly 20% of India's total capacity. In terms of imports, the PP supply from India in 2019 was 120000 tons, accounting for about 3.5% of the total imports. Although the shut down production capacity has limited impact on China, the market is worried that India is still in the early stage of the outbreak of public health incidents, and there is still the possibility of further deterioration in the later stage

After entering April, the operating rate of downstream plastic knitting and BOPP has not changed much. From the market research, except for some downstream centralized replenishment, most downstream chasing up sentiment has subsided, and the wait-and-see sentiment is strong. In addition, the downstream profits have weakened significantly in the near future, and it is expected that the later start-up will not be greatly improved. In addition, the continuous deterioration of overseas public health incidents has also hit the export of plastic products seriously. Some foreign orders for 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 pp09 should leave the market and wait for more orders in the early stage. In terms of cross species arbitrage, considering the valuation of pp09 and ma09 and the impact of public health events on downstream demand, it is suggested that pp09-3ma09 should narrow the price gap and intervene appropriately. In the medium and long term, the new production capacity at home and abroad doubled year-on-year this year, the pressure of PP production is still huge, and the sharp rise of PP price also makes the import profits rich, and the overseas suppliers' enthusiasm for sales to China is enhanced. We believe that the pattern of PP oversupply has not changed.