Shandong Propylene Price Exceeds RMB 8,000/mt
Lead: From the end of December to the middle of January, the mainstream price of propylene in Shandong continuously went up underpinned by the supply and demand sides. The propylene market price in Shandong exceeded RMB 8,000/mt again after two and a half months driven by the tight supply and increased demand.
In 2021, the annual average price of propylene in Shandong was RMB 7,904/mt. In the middle of October, the propylene market price in Shandong fell back rapidly after rising to RMB 9,700/mt, and it dropped by 24% to a periodic low of RMB 7,350/mt in the middle of December. From the end of December 2021 to January 2022, the Shandong propylene market improved, and the mainstream price trended up in succession. As of January 18, 2022, the mainstream dealing price of propylene in Shandong was RMB 8,050-8,100/mt, with a cumulative gain of 9.86%.
Propylene supply in Shandong tightened due to the unit maintenance and decreased external resources.
From the second half of December 2021,
From late December 2021, China’s PDH producers’ enthusiasm for running units lowered due to the serious profit loss of PDH-based propylene production, and more PDH units took maintenance. For example, the ADH unit at Shandong Shenchi Chemical, the PDH unit at Tianjin Bohai Chemical Industry and the PDH unit at Ningbo Kingfa New Advanced Material underwent maintenance. As a result, the propylene supply gradually shrank. Moreover, entering January 2022, the regional circulation of propylene resources was unsmooth, and fewer external resources flowed into Shandong. Besides, the imported propylene was also limited. Therefore, the propylene supply in Shandong tightened. Propylene producers showed high interest in raising the offers due to smooth sales, pushing up the mainstream price of propylene.
Downstream demand rose amid release of new capacity and inventory replenishment before the Spring Festival.
From the second half of December 2021, the phase II PO unit at Wanhua Chemical Group and the acrylonitrile unit at Lihuayi Group were successively put into operation, boosting the demand for propylene and supporting the propylene price. Moreover, downstream producers stocked up before the New Year’s Day holiday and the Spring Festival holiday, which also buoyed the propylene price.
The influence of some bearish factors on the propylene market was limited.
The main driver for the increase in propylene prices was that the support from the supply and demand sides strengthened. At the same time, there were also some bearish factors, but the influence was limited. The main downstream product of propylene is PP. The production of PP powder fell into a profit loss in December 2021, and the loss intensified from the second half of December. On the one hand, the end demand was insufficient, and on the other hand, the propylene price went up. The profit loss caused the industry operating rate to decline, which had bearish impact on the demand for propylene in some areas of Shandong. Therefore, the offers at some propylene producers were slightly low. In addition, the operating rates of some PO units in north Shandong dropped in different degrees, reducing the demand for propylene.
Near the second half of January 2022, end plastic woven companies successively took holiday, and the PP price trend should be focused on because the operating rate of the PP industry will directly affect the demand for propylene. In addition, a certain PDH unit in North China is about to resume production, which will supplement the market supply. As the end of the year approaches, the inventory replenishment of downstream producers and the inventory clearance of propylene producers need to be paid attention to. The propylene price has been pushed to a staged high level, and the continuation of the rise remains to be observed.
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