There is no doubt that the substantive progress made in the U.S.-China talks has become the primary driver behind this PP market rebound.

At 3:00 PM on May 12, the governments of China and the United States jointly released the Joint Statement on U.S.-China Economic and Trade Meeting in Geneva, announcing a significant reduction in bilateral tariff barriers and signaling a thaw in trade relations.

According to the statement, the U.S. will eliminate 91% of its additional tariffs on Chinese goods and adjust the remaining 34% of reciprocal tariffs-with 24% suspended for 90 days and 10% remaining unchanged. In reciprocal response, China will remove 91% of its retaliatory tariffs on U.S. goods and similarly adjust 34% of its counter-tariffs-24% suspended for 90 days and 10% retained.

 

Compared to prior market expectations, the agreement appears somewhat better-than-anticipated, as earlier speculation had centered on whether reductions would reach 50% or 80%.

 

Therefore, international crude oil prices continues to rise, which has driven a broad rally across commodity futures, but PP futures have underperformed compared to other energy and chemical products (such as styrene, methanol, PTA, PE, etc.), which is fundamentally related to its own supply and demand dynamics.

 

Firstly, in terms of operating rates, the maintenance intensity in 2025 is weaker than during the same period in 2024.

Secondly, downstream demand has been mediocre. After the Tomb-Sweeping Day holiday, the tariff policy shock led to slow follow-up of new downstream orders, with some orders being diverted, resulting in a decline in operating rates. Although the easing of tariff policies may facilitate the return of these orders, May-July represents the seasonal demand off-season for PP, leaving uncertainty about the potential for future improvement.

It's believed that this round of PP market rebound tends more toward a retaliatory recovery after the easing of U.S.-China tariff policies. Although the rebound has strengthened downstream willingness to cover short positions at low prices, the rapid narrowing of the spot-futures basis reflects weak downstream buying interest for high-price goods. In the short term, considering that market sentiment remains relatively strong and the bullish macro factors are still in effect, PP market retains rebound potential. However, the timing and magnitude of this rebound should not be overly optimistic, as demand-side constraints remain the most significant downside risk. Finally, regarding the subsequent developments in U.S.-China tariff policies, industry participants are advised to maintain close attention, given that the U.S. stance has been inconsistent and carries substantial uncertainty.