Supply Pressure Drives Propylene Prices to Six-Month Low
In September, influenced by weaker costs and supply, China’s propylene market price continued to decline. In the short term, supply pressure persists, and demand support remains limited. Propylene prices are likely to consolidate at low levels.
Falling Costs and Ample Supply Push Propylene Prices to a Six-Month Low
In September, propylene prices continued to decline as lower crude oil prices weakened cost support. At the same time, propylene supply remained ample, and some enterprises faced selling pressure, leading to price reductions. Although pre-holiday restocking provided some support for propylene demand, the boost was relatively limited, causing prices to continue their downward trend. As of September 25, mainstream transaction prices in the Shandong propylene market were at RMB 6,530–6,650/mt, down RMB 310/mt from the beginning of the month, a drop of 4.49%.
Crude Oil Price Declines Weaken Cost Support
Amid economic recession expectations triggered by U.S. non-farm payroll data and a weak demand outlook, crude oil prices fell in August, with Brent oil down 5.97% month-on-month. In September, weaker macroeconomic data and reduced oil demand caused prices to drop further, with Brent crude down 7.41% by September 24. This ongoing and notable decline in oil prices further eroded propylene’s cost support, and bearish market sentiment also exerted downward pressure on propylene prices.
Ample Supply and Producers’ Strong Willingness to Sell
In September, the number of shutdowns and overhauls decreased compared to earlier periods. Meanwhile, units at Shandong Wanda Tianhong Chemical, Grand Resource, Anqing Taihengfa Petrochemical (Group), and Zibo Qixiang Tengda Chemical completed overhauls, leading to increased overall market supply. China Zhenhua Oil's PDH unit, which began production in August, also contributed notably to the increase in Shandong’s propylene supply. Despite a slight reduction in its operational load in September, propylene output remained ample, further weighing on the market. Propylene prices in Shandong were under pressure, with limited room for increases. Most enterprises managed to control inventory pressure, but with both the Mid-Autumn Festival and National Day approaching, producers were keen to sell before the holidays, leading to further price concessions.
Stable Demand Support, but Limited Boost
With propylene prices falling in September, downstream production costs dropped, improving factory profitability and increasing their willingness to accept current propylene prices, which, to some extent, boosted demand. Prices for key downstream PP granules and powder remained flat in September, with powder prices even surpassing those of granules. The profitability of the PP powder industry was optimistic, and the operational enthusiasm of powder units improved, with some previously overhauled units resuming production. Operating units continued to procure feedstocks, providing some support for propylene demand. However, due to the higher processing costs of granules, some granule units suffered losses, which affected their operations and thus weighed on propylene demand. Some chemical downstream units resumed operations after cuts and maintenance, providing minor support for propylene demand. Pre-holiday restocking activity in downstream propylene plants was positive, though the continued price decline dampened market confidence. Throughout the month, downstream plants mainly procured on-demand at lower prices. While demand remained stable, its support for prices was overall limited.
Limited Positive Support, Prices Expected to Consolidate at Low Levels in the Short Term
Ahead of National Day, there will be minor operational changes in a few propylene units, with minimal impact on overall supply. Propylene supply remains relatively abundant, and producers continue to be eager to sell. Some downstream plants have begun pre-holiday restocking, providing stable support for demand, which may help propylene prices stabilize with slight adjustments. However, both upward and downward movements are expected to be limited. After the holiday, some units that were previously under maintenance are expected to resume operations, and new production capacity may come online, leading to an anticipated increase in supply. Some producers may still face selling pressure. By mid-to-late October, end-user demand is expected to enter a seasonal lull. Although some downstream plants may engage in post-holiday restocking, providing minor support for demand, the overall boost to China’s propylene market is expected to remain limited, and propylene prices are likely to continue consolidating at low levels.
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