Apr China Propylene Prices to Edge down with Supply Pressure
China’s propylene prices skyrocketed and then went down in March, but the overall propylene average price was higher than expected with unexpected unit shutdown. New units may come on stream intensively in April, so the overall propylene market may experience supply pressure. It is estimated that China’s propylene prices may edge down in April.
From end February to early March, PDH units at Zibo Qixiang Tengda Chemical, Lihuayi Weiyuan Chemical, Shandong Tianhong Chemical and Zibo Xintai Petrochemical were restarted in succession, dragging down propylene prices. After that, PDH units at Lihuayi Weiyuan Chemical and Zibo Xintai Petrochemical were shut down again, and Lihuayi Weiyuan Chemical purchased many propylene resources from the market, supporting the propylene market trading. Accordingly, propylene prices in Shandong rebounded. As of March 7, 2024, propylene prices in Shandong averaged RMB 7,085/mt.
However, the rapid propylene price increments intensified profit losses at PP and some chemical downstream enterprises, so the demand for propylene shrank somewhat. Moreover, the MTO unit at LUXI Group and PDH units at Lihuayi Weiyuan Chemical and Zibo Xintai Petrochemical were restarted in mid-March, lifting propylene supply. Sales at propylene producers became sluggish, and propylene prices dropped accordingly. On March 19, 2024, propylene prices in Shandong averaged RMB 6,900/mt, down 2.61% from the high level in March.
Propylene prices declined moderately in mid-March. The inventory pressure on propylene producers was rational, and market participants adopted bullish attitudes to propylene supply. Accordingly, the overall propylene prices dropped slowly. Overall, the unexpected PDH unit shutdown at Lihuayi Weiyuan Chemical offset the bearish impacts of intensive PDH unit restarts, and the overall propylene prices were relatively high. It is estimated that propylene prices may decline in H2 March, but the average propylene price in March may be higher than expected. SCI reckons that the average propylene price in Shandong may be about RMB 6,900/mt in March.
Recently, the international crude oil prices fluctuated upward, so the cost support for propylene market was strong. Supported by the rising international crude oil prices, PP futures prices went up, and PP powder prices went up accordingly. With the price spread between PP and propylene enlarging slightly, the demand for propylene from some PP plants improved marginally. Sales at propylene producers recovered, so some propylene producers intended to raise propylene prices. Given the rational propylene supply, it is estimated that propylene prices may go up in the short term. There may be uncertainties in the international crude oil prices and PP prices, and some propylene downstream plants may still experience cost pressure. Accordingly, the overall propylene price increment may be limited.
In H2 March 2024, the 400kt/a PDH unit at Shandong Zhonghai Fine Chemical was put into test run. The 750kt/a PDH unit at China ZhenHua Oil and the 900kt/a PDH unit at Jinneng Chemical (Qingdao) Phase II may start test run in April 2024, lifting the overall propylene supply. Moreover, most overhauled PDH units in northern China may be restarted, so the overall propylene supply may be ample. Meanwhile, some new downstream units may be put into use, propping up the demand for propylene. Given the cost pressure, downstream users may show limited interest in purchasing feedstock. Given the relatively ample supply and limited demand improvement, it is estimated that propylene prices may inch down in April.
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