Jan Propylene Supply-Demand Game to Intensify
Introduction: In December 2024, China's propylene prices were stable-to-increasing. Although some units resumed production, the overall impact was under control, so supply pressure on propylene producers was limited, indicating some supply support for propylene prices. As of December 24, the monthly average price of propylene in the Shandong market stood at RMB 6,972/mt, up 1.01%.
In January 2025, the market supply is expected to climb with newly added capacity to be put into operation, while downstream pre-holiday stockpiling may boost the demand for propylene. It is predicted that the game between supply and demand may be more intense, and propylene prices may be stable-to-decreasing.
Propylene prices fluctuated at highs in the northern market.
In December, propylene prices fluctuated at a high level in the northern market, with the monthly average price inching up MoM. On the cost side, mainstream prices of crude oil and propane inched down MoM, indicating slightly weak cost guidance for propylene prices. On the supply side, there was some supply support for propylene prices in the Shandong market, as propylene resources flowing into Shandong were few. Some previously shut units resumed production, and some propylene producers sold goods, but exerting limited impact on the propylene supply. Besides, propylene plants saw manageable inventory and smooth sales, underpinning propylene prices somewhat. On the demand side, downstream PP and PO plants faced large cost pressure amid high propylene prices, and some downstream units were cut loads accordingly, influencing the demand for propylene. However, the demand also increased with some PO units in Shandong put into operation. Within the month, downstream plants and traders bought on dips, and the overall demand for propylene remained largely stable.
Propylene prices were stable-to-increasing in the southern market.
In December, the southern market saw stable-to-increasing propylene prices, with the monthly average price inching up MoM. On the cost side, crude oil prices fluctuated slightly, providing limited guidance for propylene prices. On the supply side, some southern units were restarted, while the overall impact was under control. Within the month, the unit operating rates of major propylene plants stayed largely stable, but some propylene producers decreased selling, so the propylene spot supply tended to tighten. In addition, propylene supply is expected to decline with some units to be shut down, shoring up propylene prices somewhat. As for the demand, the overall downstream purchasing stabilized. Therefore, propylene prices trended flat to up.
Propylene prices may inch down in January 2025 amid intensifying game between supply and demand.
On the supply side, the overall propylene supply may present an uptrend, as many newly added units are planned to be put into operation. Considering some PDH unit shutdowns, the market supply is predicted to be manageable, while sales pressure on some propylene producers may be larger. In terms of the demand, approaching the Spring Festival holidays, some end factories are gradually shut down, so their demand for PP may be insipid, and the cost pressure on PP plants is anticipated to remain, inhibiting the demand for propylene. Nonetheless, in mid-to-late December, some downstream plants will make pre-holiday stockpiling, boosting the demand for propylene to some extent. On the whole, the supply pressure on propylene producers may mount slightly, and the tug-of-war between supply and demand may remain. It is predicted that propylene prices may fluctuate slightly.
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