Propylene Prices Fall amid Insufficient Demand
Introduction: In June, the Middle East issue escalated sharply, so international crude oil prices increased. Propylene prices in China and international markets rose to a periodic peak due to geopolitical news disturbances and unexpected shutdowns of China’s certain major units. However, downstream plants showed insufficient intentions to purchase at highs, and geopolitical influences gradually faded, so propylene prices in China and international markets decreased with China’s some PDH units restarted or running at higher loads.
Propylene prices first increased and then dropped amid the game between demand and supply domestically and internationally.
As can be seen from the above chart, Shandong and CFR China propylene prices first increased and then fell since June. In H1 June, due to increased worried sentiments about the Middle East issue, international crude oil prices increased notably, strengthening cost supports for propylene prices. At the same time, China’s certain major propylene units were unexpectedly shut down, resulting in an expected decrease in market supply, and propylene prices in China and international markets both showed an upward trend amid market disturbances and decreased supply pressure. However, since H2 June, on the one hand, market influences decreased due to eased geopolitical situations. On the other hand, propylene supply remained ample with some units resuming production and running at higher loads. Propylene producers and traders cut prices to sell as downstream plants showed resistance to high-price propylene resources, so propylene prices in China and international markets declined.
Downstream plants showed insufficient intentions to purchase at highs amid limited demand.
As can be seen from the above chart, the operating rate index of propylene downstream plants first increased and then declined since June, and overall demand improved limitedly. In June, the operating rate of PP power, PO, NBA, acetone, and acrylic acid increased notably, indicating rising rigid demand from downstream plants, and driving up propylene prices. However, with propylene prices in China and Asia mounting to a periodic high level, the profitability of downstream products was unfavorable, leading to decreased purchasing positivity. In July, the downstream operating rate index decreased, dragging down propylene prices in China and international markets.
Propylene prices in China and international markets may decrease amid the game between supply and demand.
In the early stage of the Middle East issue escalation, the propylene mainstream price may increase due to the market sentiment. Propylene prices may lack persistently upward trend considering limited demand from downstream plants. The trend of propylene market prices largely aligned with earlier forecasts. In the past week, without unexpected news disruptions, some propylene units may be restarted or run at higher loads based on supply-demand fundamentals, so the output was intensively released, posing supply pressure on the propylene market. Meanwhile, downstream plants lacked enthusiasm for restocking amid wait-and-see sentiments, and their expectation for prices declined. Overall, propylene prices in China and international markets may inch down amid increasing supply and weaker demand.
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