SunSirs: Propylene Pulls Back from Highs: Is This a Short-Term Correction or a Trend Reversal?

Market Overview:

This week, spot prices for propylene remained at elevated levels. Although the price saw a one-day decline on May 8—falling to 9,591.00 RMB/ton (a drop of 2.21%)—the overall price level has shifted significantly upward compared to late April. The current price stands at 9,591.00 RMB/ton, marking a one-year high.

Supply and Demand Fundamentals:

Fundamentals are bearish (due to increased supply), while technicals are bullish (as the spread relative to the moving average is widening in positive territory). With maintenance shutdowns at production facilities ending in May, supply has increased, while demand remains weak. Theoretically, prices should decline.

Why Prices Remain Strong: A Technical Analysis

Cost Support: Although supply has increased, geopolitical uncertainties in the Middle East may be propping up raw material costs, effectively preventing prices from falling further. The upward momentum established between late April and early May remains significant, and market sentiment has not yet been fully swayed by underlying fundamentals. The decline observed on May 8th (-2.21%) currently appears to be more of a technical correction following a rapid ascent, rather than a trend reversal.

Price Forecast:

Short-term Trend (Next 1 Week): Volatile with an upward bias; attempting a technical recovery. Given that the deviation from the moving average is currently in a phase of "positive expansion," this indicates that the upward trend has not yet concluded. The decline observed on May 8 was, in all likelihood, driven by short-term profit-taking; the price is expected to find support near 9,500 yuan/ton and subsequently re-test the previous high of 9,800 yuan/ton.

Medium-Term Risk (Next 2–3 Weeks): Close attention must be paid to the emergence of a "positive narrowing" signal. Although the current trend is characterized by "positive widening," the pressure from fundamental oversupply remains a tangible reality. If prices fail to break through the previous high of 9,824.33 yuan/ton while the moving averages begin to flatten, the trend will shift from "positive widening" to "positive narrowing"—at which point a genuine signal of a market peak would be confirmed.

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