Propylene: Mixed Market Sentiment, Price Fluctuation Widens
Since October, international crude oil prices have fluctuated broadly, while several propylene units experienced restarts or shutdowns. Some of these changes have notably impacted the market, leading to an increase in influencing factors and wider price fluctuations. In the short term, the anticipated restarts and shutdowns of some PDH units have not materialized, with supply still being the key driver of propylene market price trends.
Propylene Prices Rebound in Early October Due to Supportive Factors
In Q3, propylene prices trended downward due to increased supply pressures, particularly in key trading regions where new capacities came online. By late September, the market had hit a six-month low. However, in early October, propylene prices rebounded sharply. This was directly linked to rising international oil prices, declining logistics efficiency, and temporary operating rate fluctuations of certain units. By October 8, mainstream transactions in the Shandong propylene market reached RMB 6,860–6,900/mt, up RMB 355/mt or 5.44% from pre-holiday levels.
Rising Oil Prices Strengthen Cost Support for Propylene Prices
During the National Day holiday, the escalating tensions in the Middle East, strong global stock markets, and better-than-expected U.S. non-farm payroll data all led to a sustained increase in crude oil prices, with Brent surpassing the $80/bbl. Given the high correlation between propylene prices and crude oil prices, the rise in oil prices boosted propylene production costs, offering market support and pushing propylene prices higher.
Logistical Constraints and Unit Fluctuations Support Propylene Market
In addition to cost factors, supply-side constraints also contributed to the upward price during the holiday. Before the holiday, many production enterprises cleared inventories, bringing stocks to low levels. With highway restrictions during the holiday and declined logistics efficiency, the inflow of propylene supplies into Shandong from other regions was reduced. Furthermore, operational disruptions at Shandong New Era Polymer Material cracker and China Zhenhua Oil’s PDH unit added further supply-side support, alongside the rise in crude oil prices. These factors improved market sentiment, prompting downstream plants to increase procurement and causing a sharp recovery in propylene market.
Post-Holiday: Propylene Price Decline Amid Rising Negative Factors
Following the price spike during the holiday, propylene prices began to retreat from their highs as the market absorbed the earlier gains. Post-holiday, falling crude oil prices weakened the cost support for propylene. Additionally, a major PDH unit in North China planned to restart, while Wanhua Chemical Group’s PDH unit resumed production during the holiday, increasing market supply. On the demand side, some PO units in Shandong delayed restarts due to poor profitability, while other units reduced production or remained shut down, affecting propylene demand. This, combined with falling prices, led to more bearish sentiment among market participants and a decline in procurement activity by downstream plants, further pulling prices down.
Upcoming Maintenance Plans May Bolster Propylene Prices Again
Supply side continued to support propylene prices, with reports of an upcoming shutdown of a PDH unit in Tianjin, along with a similar plan of a unit in Qingdao. These anticipated fluctuations boosted supply-side expectations. In addition, a PDH unit in North China remained shut down, shifting market sentiment from bearish to bullish. Downstream plants and traders increased their purchasing enthusiasm, leading to a notable improvement in demand for propylene. In the past few days, many producers experienced smooth sales, with some auctioned goods selling at a premium. With reduced inventory pressure, producers raised their offers, driving a price rebound.
Supply Still Dominate the Propylene Market
This week, oil prices are expected to continue fluctuating broadly. On the demand side, reduced operating rates and shutdowns of PO units will continue to impact propylene demand, albeit to a limited extent. Profit margins for downstream products will also play a crucial role. However, the supply side remains the dominant influence, with multiple propylene units expected to experience operational fluctuations. Some PDH units have restarted as anticipated, and the market remains heavily influenced by sentiment and expectations, resulting in active trading and temporary price rebounds. Should a major PDH unit in North China restart, market activity may weaken again. Moreover, the successful implementation of the planned shutdowns of two other PDH units remains uncertain. In addition, new propylene capacities are expected to come online in November, further complicating the supply landscape, with mixed factors contributing to ongoing uncertainty in the propylene market.
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