Propylene Prices to Decline Later amid Poor Downstream Profitability
Introduction: From August to September, some major propylene units were shut down, and the overall market supply pressure reduced accordingly, driving propylene prices to rebound from lows and reach a phased peak. This led to a gradual decline in profit margins for downstream products, and units at some plants were shut down or ran at lower loads. In this context, downstream demand may be weaker, dragging down propylene prices.
Market supply pressure eased temporarily, driving a rebound in propylene prices from lows.
As can be seen from the chart above, propylene prices bottomed out and rose between August and September, reaching a phased peak of RMB 6,700/mt in mid-September in Shandong. During this period, some major propylene units were planned to shut down or were unexpected to shut down, so propylene commercial volume decreased notably. However, downstream still purchased on rigid demand. As the inventory of propylene producers gradually depleted, their willingness to raise offers increased, leading to an upward trend in propylene prices. A comparison between propylene prices in Shandong and East China showed largely consistent trends. However, there were a relatively large number of upstream and downstream units in Shandong, and some of them lacked full integration. The propylene trading atmosphere was relatively active, so price adjustments in Shandong occurred more frequently and with greater magnitude than in East China.
The theoretical gross margin of downstream products remained negative, leading to a decrease in restocking intentions.
As can be seen from the chart above, most downstream propylene products experienced negative gross margins from August to September. Even 2-EH and NBA, which maintained relatively healthy profits earlier, also fell into negative margin territory during this period. Over these two months, propylene prices rebounded from lows with a total increase of RMB 545/mt, while the price rise in most downstream products remained limited, leading to widespread negative theoretical margins across the downstream industry. PP, the largest downstream product by consumption share, experienced unexpected shutdowns or production load reduction due to severe cost pressure or other unforeseen factors. This significantly reduced demand for propylene. At the same time, some integrated upstream propylene units remained in operation, increasing commercial volume in the propylene market. In addition, several units may be restarted or are planned to be restarted in mid-to-late September, further intensifying supply pressure. As a result, propylene prices slightly eased.
Looking ahead from late September to October, propylene prices may continue to decline amid increasing supply and sluggish demand. Units at Zhenhua Petrochemical, JINNENG Chemical (Qingdao), Ningbo Kingfa Advanced Materials, and Oriental Energy (Zhangjiagang) may be restarted, so the propylene market supply pressure is likely to intensify significantly. For downstream products, although pre-holiday restocking ahead of the National Day holiday may still exist, the prolonged negative theoretical margins may make sustained and large-scale procurement unlikely. The overall downstream demand is expected to remain weak, which may further drag down propylene prices.
All information provided by SCI is for reference only, which shall not be reproduced without permission.
Please click "Read more" for the full article.
