The Propylene Market in January Is Worth Looking Forward To

Highlights:

Recently, the propylene market continuously inched up. With the increase in the international crude oil prices and the support from the supply and demand fundamentals, the propylene prices reached the highest point over the past one month. It is predicted that the propylene market will run favorably. The tight supply and the replenishment before the Spring Festival holiday will boost the propylene market. Therefore, the mainstream prices of propylene may inch up M-O-M.

From December 23 to January 8, mainstream prices of propylene continuously edged up. Up to January 8, mainstream prices of propylene in Shandong rose to RMB 8,200-8,300/mt, up RMB 800/mt or 10.74% from December 23. The propylene market relatively ran favorably in recent days after the constant surge and crash in the early stage. What were the main influencing factors for the recent and late propylene market?

1. The international crude oil prices rose in succession, boosting the propylene market.

In recent days, the international crude oil prices rose in succession, and the Brent gained to $ 57.33/bbl on January 7, up 13.59% from $ 50.47/bbl on December 24. This strongly drove the propylene market, and the market sentiments improved obviously.

2. The number of overhaul units increased, causing the propylene supply to be tight.

Although the number of the overhaul maintenance was limited, the capacity of the single set of overhaul unit was large. Hereinto, in East China, there was three sets of overhaul units, and the total capacity was 1320kt, making the propylene supply in the region decreased noticeably. Besides, the imported propylene resources were short, so the mainstream prices of propylene in the region remained a high level, and offers of propylene at Ningbo Haiyue New Material and PetroChina continuously went up. In North China, the PDH unit at Tianjin Bohai Chemical Group experienced the maintenance, but the matched PO and oxo-alcohols units ran normally. Thus, this had a great impact on the propylene market. The company reduced the supply to its downstream long-term contractors, so these contractors needed to replenish the propylene from the market, further causing the market supply tight.

3. The overall operating rate at downstream producers was stable, so the rigid demand existed all the time.

The overall operating rate in downstream industries was stable. Hereinto, the operating rate at PP powder, NBA and 2-EH producers inched down, but that at PO, acrylonitrile, acetone producers inched up. Thus it could be seen that the demand for propylene was stable, and the profits at main downstream product producers was passable. So these producers can afford for the increase in propylene prices. In addition, downstream producers’ procurement was stable, so the inventory was at high levels.

Forecast

In terms of international crude oil, the price will increase slightly in January, and the output is likely to decline more. For another thing, the FED postpones the process of raising interest rates next year, so the weakening U.S. dollar will also support the oil prices to rise. In terms of the supply and demand, In H1 January, the propylene supply will still be short. From H2 January to the end, some units will restart, so the supply will increase. However, downstream producers will stock up before the Spring Festival holiday, supporting the propylene market. In general, mainstream prices of propylene will edge up in January, and the monthly average price will be around RMB 8,200/mt. Players should focus on the change in the supply and demand and the replenishment before the Spring Festival.