Propylene and Related Product Price Correlation Analysis
There is a strong price correlation between propylene and related products. In 2024, there were more influential factors in the propylene market. Propylene prices fluctuated mainly on the supply-demand changes resulting from propylene and downstream production fluctuations. Therefore, the price correlations between propylene and crude oil/PP lowered.
Price Correlation Analysis Between Propylene and Major Feedstock
As the major feedstock of propylene, crude oil price trends also influence prices of propane and other propylene feedstocks. Therefore, crude oil prices determine propylene cost and have a strong impact on the operation of propylene units. Crude oil prices mainly exert an impact on market sentiments in the short period, but sometimes determine propylene price trends when crude oil sees large price fluctuations. This results in a high consistency in price trends of propylene and crude oil.
As for 2024, the price correlation between crude oil and propylene decreased with the correlation coefficient only showing 0.31. Within the year, propylene market prices were mainly affected by the supply-demand fundamentals due to constant production fluctuations of propylene and downstream products. Particularly from February to June and in October, the propylene price trend deviated from the crude oil price trend, indicating a lower influence of cost on propylene prices.
Price Correlation Analysis Between Propylene and the Major Downstream Product
PP powder has a relatively strong correlation with propylene, so PP powder price is one of the important reference indicators for evaluating propylene prices. The major downstream products of propylene are PP granules and PP powder. Most of China’s PP granule producers have matched propylene units, so they don’t need to buy propylene. However, PP powder producers need to purchase propylene. As the profit from producing PP powder is mediocre, PP powder cost changes caused by propylene price fluctuations will directly influence its profitability, and further influence the operating rate of PP powder. Finally, the demand for propylene will be affected.
Overall, in 2024, the slightly widening price spread between PP powder and propylene reflected a decline in PP powder production cost in the wake of propylene price drop. Weakening propylene market weighed down the cost support for PP powder prices but expanded the PP powder profit margin. PP powder plants showed increased receptivity of propylene prices. This boosted the demand for propylene and influenced propylene prices.
As for 2024, the price correlation between PP powder and propylene reduced somewhat with correlation coefficient of 0.61. In 2024, the price trend of PP powder aligned with that of propylene overall. However, PP powder prices were affected by PP future prices, end demand, and low-priced PP granules besides propylene prices. This led to a lower price correlation between PP powder and propylene. In 2024, the price spread between PP powder and propylene was RMB 465/mt, up RMB 103/mt YOY, while down RMB 54/mt compared with the average price spread from 2020 to 2024. The highest price spread was RMB 828/mt in September, while the lowest price spread was RMB 155/mt in March.
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