Early May Propane Prices Inched up with Rigid Demand
After the Labor Day holiday, the downstream plants replenished stocks on a need-to basis, giving support to China’s propane market prices. However, in terms of the future market, China’s propane market may lack stimulation since the market is about to enter the traditional consumption slack season.
China’s propane market prices inched up at the beginning of May 2024. During the Labor Day holiday, the cross-regional resource circulation was affected, and the international crude oil prices edged down. However, supported by the supply-side and the downstream users’ replenishment, China’s propane prices rose instead of decreasing. As of May 10, the average price of China’s propane was RMB 5,266/mt, up RMB 111/mt or 2.15% from end April.
China’s overall propane supply was at a low level, giving support to its market prices. In April 2024, there was intensive unit maintenance at producers, which continued until May 2024. Plus, the operating rates at some producers deceased, dragging down the propane supply. What’s more, the propane import volume was low at the beginning of May, plus the sales were favorable at ports, with some even lacking supply. Thus, the overall propane supply was tight, giving strong support to the propane market.
The propane downstream demand performed well, giving strong support to the propane prices. Influenced by the Labor Day holiday, the downstream plants replenished stocks intensively before the holiday, so propane sales were favorable, and producers tended to raise prices during the holiday. After the holiday, some plants still need to replenish stocks, so the trading atmosphere was positive. What’s more, the civil-use gas prices were rather high, some of which were even the same as the propane prices. Thus, the propane downstream procurement was positive, and propane demand increased.
In terms of chemical demand, some overhauled PDH units were restarted during the holiday, lifting the overall PDH operating rate. Thus, the chemical demand performed well. As of May 9, China’s PDH unit operating rates increased to about 74%, up 12% from the end of April. What’s more, there was a pretty large price spread between propane and naphtha. Thus, the downstream plants preferred propane, as its prices were lower. Accordingly, the demand for propane from the cracking industry improved. Overall, the strong chemical demand supported China’s propane market prices.
In addition, the international propane prices fluctuated at highs, supporting China’s propane market. At the end of April, there was a decline in May propane CP. However, the imported propane market performed well in May, so the estimated propane import cost remained firm. The propane import costs fluctuated at highs, giving support to China’s propane market prices and players’ sentiment.
China’s propane market may weaken in H2 May 2024. With the price increasing, the downstream procurement enthusiasm may weaken, and producers may be cautious. In the future, China’s propane supply may be low, and the chemical demand may perform well, giving support to the propane market. China’s propane market prices may fluctuate at highs in H2 May 2024. However, the propane civil-use demand may be weak, plus the profits from the downstream deep-processing units may underperform, so the support from chemical demand may be limited, and China’s propane market prices may go down after stabilizing. However, it is estimated that the propane market may weaken within a limited range since China’s propane supply level may be low, and the support of chemical demand may be moderate.
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