Propylene Industry Chain Analysis: Cost Pass Blocked, Most Downstream Product Price Declined
Preamble: In July 2024, the propylene industry chain saw price fluctuations. Though the prices of Brent and propylene increased M-O-M, the cost pass was blocked due to sluggish downstream demand, giving thin support to the prices of downstream products. It is estimated that the international crude oil prices may trend flat, supporting propylene market prices. However, the supply and demand fundamentals may give thin support to the propylene prices due to new capacity expansion and sluggish downstream demand.
The international crude oil prices trended flat after reaching the highest at the beginning of July, with the price increasing M-O-M, giving support to the propylene industry chain. In July 2024, China’s propylene prices inched up, while the prices of most downstream products declined due to sluggish demand.
Jul Most Downstream Product Price Declined Due to Blocked Cost Pass
Remark: Data was up to July 19, 2024.
Cost: Crude Oil Price Increase Gives Thin Support to Propylene Industry Chain
In July 2024, the international crude oil prices increased M-O-M, while the propane and methanol prices decreased M-O-M. With the U.S. crude oil demand in summer performing well as expected, the crude oil inventory declined consecutively for three weeks owing to the increased operating rate of oil refineries. In addition, the Fed’s interest cut gave support to the international crude oil market. The international crude oil prices trended flat after reaching the highest price at $87.43/bbl, and the monthly average price increased by 2.9% M-O-M. The propane prices in Shandong rebounded in July due to unchanged propane CP and rational supply pressure. As of July 19, 2024, the propane prices in Shandong were RMB 5,225-5,305/mt, and the monthly average price decreased by 0.3% M-O-M due to sluggish civil-use demand. China’s methanol prices fell after rising in July, and the prices declined M-O-M due to increased inventory at ports and weak downstream demand. According to SCI’s data, methanol inventory at ports in Jiangsu was 598kt, up 190kt compared with the end of June 2024.
Overall, the international crude oil prices increased in July, giving support to the propylene industry chain. However, the prices of most propylene downstream products declined due to sluggish demand.
Supply: Propylene Unit Operating Rate Declines Due to More Unit Shutdowns
Overall, the international crude oil prices increased in July, giving support to the propylene industry chain. However, the prices of most propylene downstream products declined due to sluggish demand.
In July 2024, propylene market supply in some areas tightened as there were more unit shutdowns, and the capacity involved totaled about 3,000kt/a. The propylene units at PetroChina Ningxia Petrochemical Company, Shenhua Xinjiang Energy, Ningxia Runfeng New Material Technology, Ningxia Baofeng Energy Group Phase III, and Xinjiang Hengyou Energy Technology were still shut down. In addition, some PDH units in East China and Shandong took overhauls. As of July 18, China’s propylene industry weekly operating rate was 76.47%, down 0.77% compared with the end of June. The operating rate of the PDH unit was 78.6%, down 1.6% compared with the end of June. The propylene market supply pressure was rational due to the operating rate decrease, supporting the market prices.
Demand: Demand Declined Due to Downstream Decreased Operating Rate
In July 2024, the propylene downstream operating rate decreased due to limited profits and declined demand. Hereinto, the operating rate of PP powder decreased notably. As of July 18, the PP powder weekly operating rate was 39.2%, down 1.3% compared with the end of June. The PO weekly operating rate was 68.6%, down 8.5% compared with the end of June. The propylene downstream operating rate index was 68.5%, down 2.6% compared with June 27. Overall, the propylene downstream demand declined in July 2024.
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