March Propylene Mainstream Price to Fluctuate at Highs
Lead: In February, the cost side and supply side gave strong support to the propylene market, but the demand for propylene was weak, so the propylene market price fell back after rising to a high level. In March, the production cost of propylene will be high, and the supply side will face bullish and bearish factors. However, the demand may improve. Therefore, the propylene market price is likely to fluctuate at a high level.
In northern China, the cost and supply sides gave strong support to the propylene market in February, but the demand was weak, so the propylene market price fell back from a high level. As of February 22, the mainstream market price of propylene in Shandong was RMB 7,800-7,930/mt, up RMB 140/mt or 1.81% from the end of January.
In southern China, the propylene market price followed the uptrend of that in northern China but dropped slightly in the second half of February. As of February 22, the mainstream market price of propylene in East China was RMB 8,000-8,050/mt, up RMB 350/mt or 4.56% from the end of January.
Northern China: The supply and cost drove the propylene price to reach a high level, but the soft demand dragged down the propylene price.
In February, the propylene market price fell back after reaching a high level. The overall profit of propylene industry underperformed, but the surge in international crude oil prices buoyed the propylene price. In terms of import and export, the overseas propylene price increased due to supply crunch, causing the arbitrage window between China’s propylene market and overseas one to open. Then, China’s propylene producers were active in export, making export volume rise. In terms of unit, the newly added light ends unit at Lihuayi Group was put into operation, but many refineries in Shandong shut the units down, so the propylene supply was tight. On the first trading day after the Spring Festival holiday, the propylene market price rallied within a wide range underpinned by soared PP futures prices. However, the end demand was limited after the holiday, and the PP industry profit became negative because the PP futures and spot prices declined. Besides, the operating rates of some downstream chemical units were insufficient, weighing on the demand for propylene. Therefore, the propylene market trading turned weak, and the propylene price slid. Near the end of February, the cost pressure on PP producers was eased somewhat, driving the downstream demand to improve. Moreover, some other bullish factors boosted the propylene market trading to improve. Therefore, the propylene price stopped dropping and mounted up.
Southern China: The propylene supply crunch was gradually eased.
In southern China, the propylene market price went up. Prices of international crude oil price and other feedstock were high, strongly supporting the propylene market. After the Spring Festival holiday, the propylene price moved up promoted by the rise in PP futures and spot prices. In the second half of February, the propylene price in Shandong slipped as PP futures and spot prices fell, so the propylene price in southern China followed the downtrend. In terms of supply and demand, the overall propylene supply was tight in the early stage after the holiday, and most of the traders had low inventory. In the second half of February, the supply shortage was gradually eased as some units resumed production.
Forecast: The propylene mainstream price may fluctuate at highs in March.
On the cost side, prices of different feedstock will be high, which will continue to give strong support to the propylene market. However, the crude oil price will face large downward pressure and fluctuate within a wide range, so players need to be alert of cost change. On the supply side, the imported resources were scarce, but the export volume increased. Some refineries such as Shandong Huaxing Petrochemical Group and some PDH units will took turnarounds, which will be a boon to the propylene market. However, the previous overhauled units will successively resume production, so the propylene supply in Shandong will recover. In addition, some PDH units in Shandong are expected to put into operation, so the commissioning process should be focused on. On the demand side, end plants will successively resume production, which may boost the PP market and the demand for propylene. The profit of downstream chemical industries will be passable, and the operating rates of some units may rebound. Therefore, the demand for propylene may inch up.
On the whole, the propylene market price may fluctuate at a high level due to the co-existing bullish and bearish factors.
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