SunSirs: Due to the Interplay of Cost and Demand Factors, Propylene Prices Are Likely to Be Atronger in the Short Term

Last week, the propylene market exhibited characteristics of both cost support and resilient demand in the short term. The rise in international oil prices provided stable underlying support, forming the basis for relatively strong price performance.

Price trend

As of December 4th, the benchmark price for propylene, according to SunSirs, was 6,190.75 RMB/ton, an increase of 0.16% compared to the beginning of the month (6,180.75 RMB/ton).

Market Analysis

Cost side:

Rising international oil prices: International oil prices rose month-on-month on December 3rd, providing cost and sentiment support. Taking the data from December 4th as an example, the ex-factory price of naphtha was around 7,071 RMB/ton.

Supply Side:

The main factor supporting propylene prices was the temporary supply tightness in certain regions (such as Shandong). However, this supply contraction was not driven by strong demand, but rather by losses and maintenance shutdowns at some production facilities, raising doubts about its sustainability.

Demand Side:

Downstream demand was the biggest drag on the market. Especially with the traditional off-season starting in December, further declines in end-user demand (such as in plastic weaving and home appliances) are expected. Downstream factories were generally adopting a "needs-based purchasing" strategy, with very low acceptance of high-priced raw materials. From a full-year perspective, the propylene market was in a capacity expansion cycle, and the fundamentals showed a "weak supply and demand" characteristic. Inventory levels were high, and its largest downstream market, polypropylene (PP), was also under price pressure due to oversupply and the onset of the off-season, which severely limits the upward potential of propylene from the demand side.

Market Forecast:

In summary, short-term propylene prices may fluctuate due to supply disruptions, but against the backdrop of weak demand and ample long-term supply, it is difficult for a sustained upward trend to form. Prices are more likely to exhibit range-bound fluctuations with an upper and lower limit, or a gradual recovery.

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