Propylene Prices Dropped to About RMB 6,000/mt
China’s propylene largely fluctuated downward in 2023, with cost support weakening and sluggish supply and demand fundamentals. Therein, China’s propylene prices witnessed rapid declines after mid-April and dropped to about RMB 6,000/mt in mid-June, hitting a three-year low. It is estimated that propylene prices in Shandong may slightly rebound in the short term but may still experience downward pressure in the long term.
Propylene dropped to around RMB 6,000/mt, hitting a three-year low.
China’s propylene largely fluctuated downward in 2023, with cost support weakening and sluggish supply and demand fundamentals. Therein, China’s propylene prices witnessed rapid declines after mid-April. Propylene prices in East China dropped below RMB 6,000/mt in early June, and those in Shandong declined to around RMB 6,000/mt in mid-June. As of June 13, propylene prices in Shandong hovered at RMB 6,000-6,070/mt, down RMB 1,715/mt or 22.13% from the annual highest level. Meanwhile, propylene prices in East China were RMB 5,850-5,950/mt, down RMB 1,650/mt or 21.85% from the annual highest level.
Propylene production costs were curtailed with feedstock prices declining.
Crude oil, propane and methanol prices went down in 2023, so the overall propylene production costs went down, especially after March. As of June 13, 2023, the Brent crude oil price declined by 18.68% Y-O-Y, and propane and methanol prices in Shandong saw Y-O-Y declines of 11.53% and 9.46% respectively. Given the notable decline in feedstock costs, the propylene cost support weakened somewhat, exerting bearish impacts on trading atmosphere and weighing down propylene prices. Although the overall propylene industry experienced profit losses in 2023, profits from producing propylene via different technologies improved somewhat, as the decline in propylene costs was higher than that in propylene prices. Therein, propane prices kept dipping after March, lifting PDH unit profits, stimulating operating rates of PDH units to increase notably. Accordingly, the overall propylene supply went up, exerting bearish impacts on propylene prices.
The overall propylene supply was ample with overlapped new PDH unit startup and rising operating rates.
The newly added propylene capacity came on stream in succession in 2023, intensifying the propylene market supply pressure. As of mid-June, propylene units at PetroChina Guangdong Petrochemical, Shandong Jinhai Chemical, Guangxi Huayi New Material, Sinopec Hainan Refining & Chemical, Jiangsu Yanchang Zhongran Chemical, Shenzhen Grand Resource Phase II, Zibo Junchen New Material Technology and China Sanjiang Fine Chemicals with the total propylene capacity of 3,910kt/a were put into use in succession. Accordingly, China’s propylene capacity totaled 59,970kt/a. With the newly added propylene capacity release, the overall propylene supply was relatively high, intensifying the sales pressure on producers and exerting bearish impacts on propylene prices.
However, some propylene units were shut down for maintenance from January to February 2023 in the wake of sluggish profits, alleviating the supply pressure. Entering March, the overhauled propylene units were restarted gradually with the decline in propylene production costs. Therein, operating rates of PDH units saw dramatic rises. In May, Tianjin Bohai Chemical Industry Group, Zibo Qixiang Tengda Chemical, Shandong Wanda Tianhong Chemical and Oriental Energy (Ningbo) New Material restarted their PDH units, so the overall operating rate of the PDH industry increased to 74.16%, up 14.9% from the lowest level in March. From H2 April to May, sales pressure on propylene producers intensified dramatically, so most propylene producers cut selling prices to promote sales. Therefore, propylene prices decreased rapidly.
The demand for propylene underperformed, as downstream users showed low operation enthusiasm.
The propylene downstream operation enthusiasm weakened in 2023. Therein, the overall operating rate index of the propylene downstream industry was 65.88% in May 2023, down 14.19% from the highest level in 2022. According to SCI’s data, PP producers experienced severe profit losses in 2023. As of June 13, PP powder producers experienced an average profit loss of RMB 223/mt. Accordingly, the operating rate of the PP powder industry was curtailed, dragging down the demand for propylene. Moreover, some PP producers sold propylene resources to the market, exerting bearish impacts on propylene market. In terms of the chemical downstream industry, profits from phenolic ketone, acrylic acid and ECH production witnessed notable Y-O-Y declines, and the overall production profit was normal. Besides, chemical downstream units took overhauls intensively, so most downstream users adopted wait-and-see attitudes and maintained just-needed procurement. Therefore, the overall propylene demand was sloppy.
China’s propylene prices are likely to be stable-to-rising in the short term but may move downward in the long run.
The price spread between PP and propylene slightly enlarged, propping up PP powder production profits and supporting the demand for propylene. Moreover, with propylene prices in Shandong declining to about RMB 6,000/mt, propylene producers intended to maintain stable offers. Some downstream users and traders bought on the dips, so the propylene market trading improved somewhat. Accordingly, it is predicted that propylene prices in Shandong may remain at RMB 6,000/mt and may inch up. In the medium to long-term, the propylene cost support may be limited, and the overall propylene supply is likely to be ample, exerting downward pressure on propylene market. Besides, market participants need to pay attention to PP price trend and profits from PP production.
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