China Propane and Butane Markets to Recover with Tight Supply
Prices of propane and butane in China showed V-shape trends in January and February 2020.
In early January, supported by the great increment in propane January CP, China’s propane prices rose somewhat. However, the international crude oil prices kept dipping, weighing on the market sentiment. Before the Spring Festival holiday, sellers suffered heavier sales pressure. Accordingly, China’s propane prices continued declining from mid-January. During the Spring Festival holiday, China’s propane prices were largely stable. After the holiday, most sellers suffered sales pressure due to the limited transportation. Accordingly, China’s propane prices kept dipping. With the prices declining, the inventory pressure on sellers alleviated somewhat. Meanwhile, some units were shut down or took overhauls, so China’s propane supply became tight. Moreover, the available imported resources were limited. Therefore, China’s propane prices kept rising.
Prices of oil products went down, weighing on the sales of butane. In January, most refineries intended to cut the inventory before the Spring Festival holiday, so the butane prices kept dipping. Moreover, most market participants adopt bearish attitudes to the February CP, weighing down the butane prices. During the Spring Festival holiday, the overall trading activity was limited. However, refineries were reluctant to further cut the selling prices due to the quite low price level. With the international crude oil prices fluctuating upward and the increment in oil products prices, the butane prices gradually rose.
China’s PDH operating rates kept dipping in January and February, mainly due to the profit losses and the public health event. Therein, the unit at Tianjin Bohai Chemical Group experienced maintenance from December 28, 2019, and the restarting date was undetermined. Units at Shaoxing Sanyuan Petrochemical, Zhejiang Satellite Petrochemical, Shandong Chambroad Petrochemicals, Ningbo Kingfa Advanced Materials, Hebei Haiwei Group, Zibo Qixiang Tengda Chemical and Shandong Dongming Petrochemical ran at low operating rates. The unit at Shandong Shenchi Chemical was shut down on January 10, and the restarting date was undetermined.
In early January, MTBE units were restarted in succession, so the overall operating rate of MTBE units at independent refineries rose somewhat. With the approach of the Spring Festival holiday, the demand for MTBE weakened somewhat, and the feedstock cost was relatively high. Accordingly, some MTBE producers shut down units or cut the unit operating rate. Therefore, the overall operating rate of MTBE units declined at the end of January. In February, the overall operating rate of MTBE units kept dipping due to the tepid demand.
In January, the overall operating rate of alkylation units greatly dropped. Due to the Spring Festival holiday and the public health event, most alkylate producers suffered heavy inventory pressure, and the overall operating rate went down accordingly. In February, the gasoline inventory at refineries was high, so most refineries cut the operating rate or shut down the unit. Accordingly, the feedstock supply declined, and the sales of alkylate underperformed. Therefore, the operating rate of alkylation units further declined. With the tight C4R2 supply, the overall operating rate remained low.
It is suggested that the players should pay close attention to the change of propane and butane markets, such as the release of newly added PDH, alkylation and MTBE capacity, so as to forecast China’s propane and butane import volume. Players should also focus on the inventory in order to understand the market situation in time.
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