Market Overview

As of February 3rd, the benchmark price for propylene, according to SunSirs, was 6,391.00 RMB/ton, a decrease of 0.21% compared to the beginning of the month (6,404.33 RMB/ton). Compared to the previous high, the price had stabilized. This indicated that after the rapid price increase in January (the price in Shandong reached 6,405 RMB/ton on January 27th), the market's upward momentum had weakened, and both buyers and sellers had become more cautious, entering a wait-and-see period.

Supply and demand fundamental analysis

The "relatively stable" market situation was primarily the result of a balance between supply and demand factors.

1. Supply side:

The tight supply-demand balance continued: The core factor supporting price increases in the previous period was the unexpectedly tight supply, particularly the fact that the operating rate of PDH (propane dehydrogenation) plants once fell below 60%. Although the overall propylene capacity utilization rate was temporarily 70.93%, it remained relatively low, and company inventories were manageable, meaning that spot resources are not abundant in the short term.

The market's focus was on the expectation of a "restart" of production. Analysts point out that if the major PDH (propane dehydrogenation) plants in northern China restart as planned, it could alleviate supply shortages and thus put pressure on market sentiment. This is one of the main reasons for the cautious market sentiment.

2. Demand side:

As downstream factories gradually entering the Spring Festival holiday, actual demand has weakened slightly. Performance varied across different downstream sectors. For example, PP powder prices remained stable at high levels, while propylene oxide and octanol prices experienced varying degrees of decline. Downstream buyers' willingness to chase higher propylene prices has slowed, making it difficult to support further significant price increases.

3. Cost side:

As of February 3, the PDH (propane dehydrogenation) process route remained deeply unprofitable (East China: -304 RMB/ton, Shandong: -444 RMB/ton). From a cost perspective, this provided strong support for propylene prices, and producers had limited willingness to further reduce prices. The previously optimistic macroeconomic sentiment and capital-driven momentum had subsided, and the market was returning its focus to fundamental supply and demand dynamics.

Market outlook

Overall, propylene prices are expected to remain volatile at high levels in the short term. Prices face significant resistance above 6,450 RMB/ton, mainly due to the seasonal weakening of downstream demand. However, potential delays in the restart of production facilities and continued losses will limit the downside potential of prices. The key to the post-holiday market trend lies in the interplay between the actual restart of production facilities and the post-holiday restocking demand from downstream companies.

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