SunSirs: Supply and Demand Gamed, Propylene Price Center Shifted downwards in March

Price trend

According to the commodity market analysis system of SunSirs, the domestic propylene (Shandong) market saw a slight increase at the beginning of March, followed by a retracement of the increase, and an overall decline in March. On March 1st, the market average was 6,870 RMB/ton, while on March 29th, the average price was 6,790 RMB/ton, a monthly decrease of 1.17%, a decrease of 1.87% compared to the same period last year.

Analysis review

Supply side: tighten first and then loosen. At the beginning of the month, multiple propylene units such as Xintai Petrochemical, Lihuayi Weiyuan, and Luxi MTO were shut down, leading to a shortage of supply in the region and a temporary tightening of supply. Starting from mid month, with multiple upstream propylene units gradually resuming operation, the supply had shifted from tight to loose, and in the second half of the month, there was a situation of oversupply.

On the demand side, there was more decline than increase. The overall decline in downstream derivatives of propylene in March was greater than the increase. 2-EH and isobutyraldehyde were negatively affected by both cost and demand, with a decline of 20.93% and 11.26% in March. The main downstream polypropylene market was weak and volatile, with average enthusiasm for purchasing propylene. Overall, the downstream demand side had poor support, which had a negative impact on propylene demand.

Cost side: still at a high level. In March, the cost side of liquefied gas, methanol, propane, etc. all experienced varying degrees of decline, weakening support for propylene, but remained relatively high. The gross profit of producing propylene from naphtha was about -138 US dollars/ton, PDH was about -300 RMB/ton, and methanol was about -500 RMB/ton.

Market outlook

After a broad decline in late March, the price of propylene fell to a low point, and downstream investors entered the market on dips. At the end of the month, the market slightly rebounded. There is a possibility of multiple propylene units restarting in April, while new production capacity from Jincheng Petrochemical and CNOOC Fine are expected to be put into operation, leading to an increase in supply. In terms of demand, there are plans to restart downstream maintenance equipment in the early stage, which provides some support for the demand side. However, some of the demand remains in high demand, which has constrained the propylene market. Overall, the supply and demand side will maintain a state of oversupply in April, and it is expected that the price center will fluctuate downward.

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