Propylene Market Moves Sideways Before Spring Festival

In 2019, the propylene market fluctuated obviously, especially in Shandong. The highest price of propylene in Shandong, appearing in H1 January, was RMB 8,300/mt. The lowest price, appearing in the middle of January, was RMB 7,650/mt. Therefore, the price spread was RMB 650/mt, and the change rate was 8.49%.

Compared with the Shandong market, the fluctuation of propylene in East China was significantly small. The highest price of propylene in East China, appearing in H1 January, was RMB 8,150/mt. The lowest price, appearing in the middle of January, was RMB 7,850/mt. Therefore, the price spread was RMB 300/mt, and the change rate was 3.82%.

Normally, the propylene price in Shandong was slightly higher than that in East China. However, during the period from January 11 to January 18, the propylene price in Shandong dropped sharply, while the decrease in the propylene price in East China was relatively limited, resulting in that the mainstream price of propylene in East China was higher than that in Shandong. The main reason was that the supply in East China continuously tight. The propylene units at CNOOC Ningbo Daxie Petrochemical and Oriental Energy (Zhangjiagang) New Material experienced the maintenance, and the propylene inventory at Ningbo Haiyue New Material remained at low levels. The influence on the propylene supply from these large-scale enterprises was great, so the propylene supply was continuously tight, boosting the downstream producers’ buying interest.

However, the PP powder should be closely focused on. The profit status of PP powder was relatively poor, but its influence on the propylene market was great, especially in Shandong and East China. The reason why the propylene price fell sharply in mid-January was directly related to the poor profitability of PP powder. Therefore, the profits and the operation of PP powder should be closely focused on.

Forecast

Two weeks left before the Spring Festival holiday, players focuses on how the propylene market will operate before the holiday. SCI believes that the supply and demand will be the most important influencing factors on the propylene market variation before the holiday.

On the supply side, in Shandong, the PDH unit at Tianjin Bohai Chemical Group will restart before the festival, which will have a great impact on the propylene supply in Shandong. In East China, the propylene units at CNOOC Ningbo Daxie Petrochemical and Oriental Energy (Zhangjiagang) New Material will be successively restart, so the propylene supply in East China will increase significantly. Overall, the propylene supply will improve before the holiday, weighing on the propylene market.

On the demand side, the PP powder will still be the biggest uncertain factor. It is heard that downstream plastic knitting producers of PP powder have successively entered the state of the holiday, and the downstream demand for PP powder gradually shrinks. Therefore, in the case of relatively good futures price trend, the price spread between the PP powder and propylene will narrow, and the profit will decrease. It is said that some PP powder producers in Shandong sell the pre-festival resources in advance, and the price is about RMB 8,500/mt. This reflects that the producers hold the bearish expectation. As a result, downstream producers mainly hold bearish attitudes to the propylene market before the festival.

SCI predicts that the propylene market may decline slightly before the festival, but the decrease is limited. Although the downstream producers hold bearish attitudes, they still need to stock up. Therefore, the stable price will be the best result.

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