Insufficient downstream buying interest leads to a "down-then-up" trend in propylene prices

[Introduction]

The domestic propylene market in China retreated from highs this week, primarily driven by a persistent weakening in downstream demand, which placed significant pressure on the market. Although price concessions by producers led to a brief, minor recovery, the lack of substantive bullish support and cooling sentiment among downstream buyers caused prices to weaken again. As of September 21, the mainstream average price for propylene in Shandong was 9,575 RMB/ton, down 1.14% from September 14. Looking ahead, weak willingness among downstream buyers to accept goods suggests the possibility of further narrow downward movements. However, with some units restarting and pre-Mid-Autumn Festival stockpiling demand expected to release, a potential recovery is anticipated. The price range is projected to fluctuate between 9,400 and 9,800 RMB/ton.

I. Supply Side: Scheduled Maintenance Units Coming Online; Significant Volume Reduction in Core Markets

Table 1: Comparison of Daily Propylene Production and Capacity Utilization Rate in Shandong (10,000 tons, %)

Data Source: Chempricehub

Table 2: Dynamics of Selected Units in Shandong (10,000 tons/year, 10,000 tons)

Data Source: Chempricehub

This week, unit startups and shutdowns coexisted in the Shandong region. The Lijin Refining & Chemical FCC unit restarted on September 18, gradually contributing to increased output. Conversely, the Zhenhua Petroleum PDH unit shut down on September 16 for an estimated 40-day maintenance period, and the Hengtong Chemical MTO unit stopped on September 19 with a recovery date yet to be determined. These mixed regional unit dynamics created conflicting market signals.

In terms of production data, daily propylene output in Shandong fell from 33,800 tons to 32,800 tons between September 14 and September 21, a month-over-month decrease of 1,000 tons (-2.96%). The daily capacity utilization rate dropped from 66.1% to 64.3%, a decline of 1.8 percentage points, indicating that overall regional operating levels continued to weaken.

Looking forward, planned maintenance units within the region are limited. The impact of reduced output from previously maintained units is gradually materializing. Weekly production is estimated at 229,800 tons, a month-over-month decrease of 1.12% compared to the previous statistical cycle (Sep 14-20), providing support to the spot market. Additionally, several units in other regions—including Ningbo Fude in East China, Haiwei Petrochemical in North China, and Quanzhou Guoheng in South China—are expected to stop operations, suggesting a continuing trend of supply contraction for domestic propylene.

II. Demand Side: Divergent Downstream Unit Dynamics; Offsetting Increases and Decreases in Demand

During this period, propane feedstock remained strong while propylene prices corrected, causing PDH margins to drop by 304 RMB/ton compared to September 11. However, downstream derivatives saw improved profitability as their own product prices rose and feedstock costs declined: Acrylonitrile margins increased by 530 RMB/ton MoM, and Propylene Oxide (PO) margins rose by 491 RMB/ton MoM. This improvement in downstream profitability has stimulated some buying demand.

Table 3: Fluctuations in Selected Downstream Units in Shandong (10,000 tons/year, 10,000 tons)

Note: Data represents theoretical values calculated based on product output and unit consumption ratios, intended for trend reference only.

Regarding downstream units, startups and shutdowns intertwined in the Shandong region this period. Qixiang Tengda’s PO unit and Shandong Kaitai’s acrylic acid unit restarted successively. Meanwhile, Shandong Haijiang’s acrylonitrile unit and Chambroad Petrochemicals’ PP unit underwent maintenance shutdowns. Consequently, the total theoretical propylene demand decreased by 1,400 tons.

Looking ahead, the Shandong Fuyu phenol/acetone unit is scheduled to restart, but the Chambroad Petrochemicals unit will remain shut down. The resulting increases and decreases in unit loads offset each other. For the Sep 21-27 cycle, total theoretical propylene demand from downstream is expected to decrease by another 3,600 tons. However, load rates at Qixiang Tengda and Shandong Kaitai may continue to rise. Combined with the expected restart of Dongming Dongfang’s n-butanol unit, short-term buying demand from downstream retains certain support.

III. Supply-Demand Gap: Narrowing Periodic Gap; Potential for Marginal Market Repair

According to Chempricehub statistics, the supply-demand gap for propylene in Shandong is expected to narrow during the Sep 21-27 cycle. Specifically, there are no obvious expectations for supply increments on the supply side, with weekly production falling MoM to 229,800 tons. On the demand side, apart from known unit startup/shutdown changes, partial restarts are expected for units such as Dongming Dongfang’s n-butanol and Wanhua Chemical’s phenol/acetone plants. Regional propylene demand is expected to rebound MoM to 211,400 tons, narrowing the supply-demand gap to 18,400 tons.

IV. Trend Outlook: Short-term Dip Followed by Rise; Long-term Likely to Remain Weak

Cost Side: Attention should be paid to Federal Reserve interest rate hike expectations and a strengthening US dollar index, which will periodically suppress international oil prices.

Supply Side: Unit startups and shutdowns are intertwined in the Shandong region. The reduction in output from Zhenhua Petroleum and Hengtong Chemical outweighs the increase from the Lijin Refining & Chemical restart. Weekly production is declining MoM, leading to an expectation of tighter supply, which supports the spot market. It remains necessary to track the progress of maintenance units in other domestic regions, while also remaining vigilant about supply disturbances from increased external sales by integrated units when propylene prices are high.

Demand Side: Downstream unit dynamics are divergent, with demand increases and decreases offsetting each other, maintaining a phase-wise weakness. However, later on, with unit restarts and the release of pre-Mid-Autumn Festival stockpiling demand, expectations for raw material support are likely to strengthen.

Comprehensive View: In the short term, downstream demand is divergent, and buyer follow-through is weak, suggesting potential downward pressure on the market. Subsequently, as demand recovers and pre-holiday stockpiling increases, the market is expected to warm up, with the price trading range projected to hover around 9,400–9,800 RMB/ton.