Supported by both cost factors and cross-regional circulation, propylene is expected to maintain high-level consolidation in the short term.

[Lead]: This week, the domestic propylene market mounted a robust price recovery, driven by the combined forces of cost support and a tight supply–demand balance. As of August 10, the average mainstream propylene price in Shandong stood at 8,190 yuan/ton, up 4.66% from August 3. In the short term, market supply has tightened overall, cross-regional cargo transfers are active, and spot prices are expected to hold in elevated rangebound trading. However, contradictions are gradually surfacing after sustained price gains: downstream derivative margins have narrowed significantly, and powder processing losses have deepened. Combined with expectations of incremental supply, the risk of a high-level correction continues to accumulate.

I. Supply side: Concentrated restarts of Shandong units; external supply continues to tighten

This week, multiple propylene units in Shandong completed maintenance and restarted in a concentrated wave, releasing incremental supply. Wanhua Penglai, Yatong Petrochemical, Wantong Petrochemical, Luxi, and other units resumed production, lifting regional supply levels. However, maintenance outages at Tianhong Chemical and Lijin Refining & Chemical partially offset the output gains.

At the data level, from August 3 to 10, Shandong's daily propylene output rose from 32,700 tons to 33,500 tons, an increase of 800 tons, or 2.45% period-on-period. Daily capacity utilization climbed from 64.0% to 65.7%, up 1.7 percentage points, with regional operating rates trending steadily higher.

In other regions, Sierbang in East China and Ningbo Kingfa remained shut down, while Satellite Chemical and Donghua Energy initiated additional temporary shutdowns. Typhoon disruptions also caused port closures, and South Korean cracker units entered maintenance cycles, sharply reducing external propylene sales volumes. With supply tightening both domestically and externally, frequent cross-regional cargo transfers supported overall domestic supply.

Table 1 — Overview of selected unit dynamics in Shandong (10,000 t/y, 10,000 t)

II. Demand side: Clear divergence in profitability; theoretical demand expected to recover

Propylene prices rose sharply this week, further widening the profitability divergence across the industry chain. From August 3 to 10, Shandong PDH margins improved by 355 yuan/ton period-on-period, a gain of 189%, as PDH profitability recovered markedly—supported by high propylene prices alongside lower propane feedstock costs. In contrast, downstream derivatives saw synchronized margin declines: PP powder, PO, octanol, and acrylonitrile all weakened. Among them, acrylonitrile margins fell 423 yuan/ton period-on-period, the steepest deterioration in losses. PP powder margins dropped 265 yuan/ton, PO margins fell 232 yuan/ton, and octanol margins declined 106 yuan/ton. Most downstream products saw insufficient demand follow-through and weak price pass-through, leaving them unable to fully absorb the rising cost pressure from propylene feedstock, with processing margins squeezed by costs.

Table 2 — Overview of selected downstream unit changes in Shandong (10,000 t/y, 10,000 t)

Note: These figures are theoretical values, calculated based on product output and unit consumption, and are intended for trend reference only.

In terms of downstream unit operations, regional changes this week were driven mainly by the concentrated return of units from maintenance: Qixiang Tengda's and Levima New Materials' PO units are scheduled to restart on August 15, Yulong Petrochemical's No. 2 PP line is expected to restart on August 12, and only Jincheng Petrochemical's PP unit remains shut down with the restart date pending. Estimates indicate short-term theoretical propylene demand will rise by 15,900 tons, a notable theoretical increment. However, with weak processing margins across most downstream products and limited terminal order follow-through, the theoretical increment from unit restarts may not fully translate into actual procurement.

Overall, the unit restarts this week present a phase-specific bullish expectation for propylene, but weak downstream profitability constrains the extent of demand realization, and substantive demand-side support for propylene remains to be seen.

III. Price spreads: PP powder–propylene spread narrowing rapidly; losses in powder sector persist

During the review period, dragged by persistently high feedstock costs, the spread between PP powder and propylene narrowed sharply from 675 yuan/ton on August 3 to 410 yuan/ton on August 10. Looking ahead, geopolitical disruptions support the feedstock side, keeping propylene prices elevated with no clear downward turning point in the near term. PP, meanwhile, remains constrained by downstream end-market demand, leaving prices largely rangebound. With propylene relatively strong and PP powder's upside limited, the spread is expected to narrow further, and losses at powder plants are likely to persist. Close attention should be paid to the negative impact of potential operating rate cuts or shutdowns at such plants.

IV. Outlook: Elevated rangebound trading in the short term; downward inflection point in the medium-to-long term

In the short term, the overall tight supply situation domestically has yet to ease. Combined with spot market support from cross-regional trading activity, the mainstream transacted propylene price is likely to gravitate toward the 8,200–8,300 yuan/ton range, with elevated rangebound consolidation dominating.

In the medium-to-long term, multiple bearish factors are gradually building, and the market may follow a "rise first, fall later" trajectory:

First, continued propylene price gains will further increase the cost burden on downstream enterprises, and deepening derivative losses will keep suppressing feedstock procurement appetite.

Second, as typhoon impacts gradually fade, imported cargoes will arrive at ports in a concentrated wave, and incremental external supply will pressure the domestic spot market.

Third, the continued recovery of PDH operating rates will release incremental supply, potentially reversing the current tight-balance pattern. With long–short positioning intensifying, the one-sided rally in propylene is nearing its end, and the risk of a medium-to-long-term price correction warrants close vigilance.