Multi-dimensional fundamental resonance sustains the logic of near-term strength and long-term weakness for propylene.

Overview: During this cycle, the domestic propylene market has shown a trend of declining first and then rebounding. The core support comes from tight supply in the market, coupled with the dual positive impact of downstream centralized replenishment. As of July 6, the average mainstream price of propylene in Shandong was 7,750 yuan/ton, up 7.12% from the average price on June 29. In the short term, the tight supply and the bottom support formed by downstream market entry still exist, and prices may edge up. However, in the medium to long term, the cost-side and supply-demand positive factors are gradually dissipating, and the price trend remains weak.

I. Supply Side: Plant Maintenance Offsets Each Other, Weekly Output Rises Slightly

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Table 1: Overview of Some Shandong Plant Dynamics (10,000 tons/year, 10,000 tons)

Source: Chempricehub Information

In the last cycle, plant maintenance changes in the Shandong region were relatively few overall. The supply reduction mainly came from the temporary shutdown of one 90,000-ton/year catalytic cracking unit at Jineng Chemical and Wantong Petrochemical, directly dragging down Shandong's comprehensive propylene operating rate to 63.86%.

Looking ahead, a clear logic of increase and decrease offset emerges in the market. On one hand, Jineng Chemical's unit is stable and running at full capacity, with no clear restart expectations for other units, making a significant increase in short-term supply unlikely. On the other hand, units of Qixiang Tengda and Huifeng Petrochemical have entered a shutdown phase, creating periodic production losses. However, after offsetting each other, the overall supply in the region shows a slight increase. Comprehensive estimates suggest that during the cycle from July 6 to July 12, the weekly propylene output in Shandong is expected to increase by 0.04 million tons to 22.87 million tons.

Additionally, from a cross-regional perspective, the progress of the Hebei Haiwei PDH unit and its supporting PP unit startup and ramping up needs continuous monitoring. The commissioning and ramping up of this company's units will change the flow of propylene in North China, increasing the volume of cross-regional inflow into Shandong, thereby indirectly suppressing local spot circulation and prices.

II. Demand Side: Many Downstream Plants Under Maintenance, Market Demand Continues to Shrink

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With propylene prices hitting bottom and rebounding, the production losses of downstream derivatives have further expanded. Comparing data from June 29, PP powder, octanol, and acrylonitrile profitability declined by 1,900%, 664%, and 155% respectively from the previous cycle; propylene oxide losses are relatively controllable, with a decline of 27%. The overall profitability of the downstream industry continues to deteriorate. Enterprises mainly purchase raw materials based on rigid demand, with weak willingness to stock up proactively.

Table 2: Fluctuation Overview of Some Shandong Downstream Units (10,000 tons/year, 10,000 tons)

Note: This data is theoretical, based on product output and consumption rates, and is for trend reference only.

Source: Chempricehub Information

Analyzing the operating rates of downstream units, the fluctuations in the last cycle were concentrated among major PP producers. Plant shutdowns led to a loss in raw material demand of 0.35 million tons; only a small number of propylene oxide units resumed production, corresponding to a demand increase of 0.14 million tons. After offsetting the increases and decreases in supply and demand, the overall downstream demand in the main sales region decreased by 0.58 million tons from the prior cycle.

Future demand is expected to weaken further: the new shutdown of Kairi PP unit will reduce demand; on the increment side, support comes only from Dongying Huatai propylene oxide continuing to ramp up and Qixiang Tengda acrylic acid unit planned restart. Overall, the scale of reduction outweighs the increase. It is estimated that during the cycle from July 6 to July 12, downstream raw material demand will shrink further by 0.77 million tons.

III. Price Spread: Raw Materials Squeeze Downstream Profits, PP Powder-Propylene Spread Shrinks Rapidly

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Entering July, the phased increase in raw material propylene prices squeezed downstream profits. The price spread between PP powder and propylene continued to shrink. In the last cycle, the average spread between the two was only 132 yuan/ton, a significant decline of 85% from the previous cycle. Downstream production profit margins are razor-thin, directly suppressing active procurement sentiment in the market.

Looking ahead, the spread between PP powder and propylene still has room to narrow further. There are more planned PP unit shutdowns in the region, and the ability to support rigid raw material demand continues to weaken. At the same time, integrated companies may sell raw materials externally, intensifying competition in the market supply, which will indirectly drag down propylene spot prices.

IV. Trend Outlook: Uptrend Space in Short Term, Weakness in Medium to Long Term

Based on the fundamental analysis of supply, demand, and price spreads, there is bottom support from tight supply in the short term. Although downstream units are continuously under maintenance (demand shrinking), and the PP powder-propylene spread has narrowed significantly (suppressing purchasing enthusiasm), rigid demand still provides some support, and market players are willing to hold prices firm. Propylene prices are expected to edge up in the short term, with Shandong's average mainstream price likely finding support around 7,800 yuan/ton.

In the medium to long term, subsequent regional weekly output will increase slightly, downstream losses will continue to worsen, demand will contract further, and the PP powder-propylene spread is still expected to narrow. The dual positive factors from costs and supply-demand balance are gradually dissipating, and the pressure of a loose supply-demand balance is emerging. Therefore, the medium to long-term outlook for propylene prices remains bearish.