Propylene: Different Production Tech Brought Different Profits

Highlights

China’s propylene market prices increased to the highest level in the past three years. The demand rebounded, and cost increased, both of which boosted the propylene market. Therein, the feedstock prices boomed, so the support from the cost side was obvious. But different production technologies brought different profits.

The production cost of propylene dropped at first, but the cost increased later in 2017. The propylene market prices basically followed the production cost tendency, and it showed that correlation between propylene production cost and market price was strong.

There are many production technologies to produce propylene. Thus, propylene’s feedstock is diverse, mainly including crude oil, coal, methanol and propane. Prices of these four feedstock increased a lot from the beginning of 2017. Therein, the upward range of coal prices was relatively small, so coal-to-propylene production cost changed narrowly. However, the upward range of crude oil, coal and methanol prices was large, in particular, propane prices increased greatly. Therefore, the propylene’ production cost increased obviously. And the methanol-to-propylene production cost was even higher than propylene market price in the same stage.

The change of production cost not only impacted propylene market tendency but also impacted the profits of propylene. Both the oil-produced propylene’s profit and coal-produced propylene’s profit were at the early 2017’s profit level, while methanol-produced propylene’s profit was at the lowest profit level of 2017. In the meantime, the PDH unit profit was also at low level of 2017. Recently, many methanol-to-propylene producers such as Zhejiang Xingxing New Energy Chemical and Shandong Hengtong chemical cut their operating rates and even shut down the units. It was mainly because the production cost was high, which led to some losses and impact the producers’ normal production. But other production technologies brought some profits more or less.

In the future, the production cost will still impose large impact on propylene market. It is hard for cost brought by various production technologies to decline sharply in the short run, so the propylene price level will remain high. The methanol-produced propylene brings some losses, so it is likely that many methanol-to-propylene producers will cut operating rates. Participants need to focus on that.