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PDH has a lot of resistance to expanding profitability

2023/7/5

In June, the pressure on the production and operation of the propane dehydrogenation to propylene (PDH) industry continued to ease, and the profitability space continued to expand, with losses turning to profits starting in the second half of the year. In the short term, PDH profitability will continue, but the profitability base is relatively fragile. The author believes that the current PDH market is mixed, there is still a lot of resistance to maintain the profitability of enterprises.

The current PDH industry has two good aspects. First, the cost pressure continues to reduce. The price of liquefied natural gas (LNG), the upstream raw material of PDH, has been declining continuously, which has reduced the cost pressure of PDH. At present, the sales price of domestic imported LNG is below 4,000 yuan/ton, and there is still room for further downward movement of LNG price in July, benefiting from which the profit of PDH plant has improved and started to turn from loss to profit in late June.

Second, the propylene market prices ushered in the rise. In the middle and late June, the extension of the China National Fuel, Xintai Petrochemical PDH plant is stopped, Xingxing new energy methanol to olefin plant parking, resulting in a decline in the propylene industry start-up rate, coupled with no pressure on the propylene plant inventory, the market offers have been pushed up, to a certain extent, boosting the propylene market mentality. In addition, downstream polypropylene (PP) and propylene monomer arbitrage space has opened up, and the load of PP enterprises and propylene oxide industry have improved, so the overall demand for propylene is still good, thus pushing up the market. In the short term, most propylene companies have controlled inventories, which may support propylene prices to run stable.

However, while analyzing the positive side, we should also see that PDH profit space continues to expand is still resistant. On the one hand, the industry boom continues to decline. In recent years, PDH projects are blooming everywhere, and capacity is expanding rapidly. Up to now, the propylene industry has added 3.65 million tons of capacity per year, with an annual capacity of nearly 60 million tons, an increase of 6.49% compared with the end of last year, and the new capacity is mainly based on PDH and light hydrocarbon cracking projects. The downstream consumption structure is more stable, with little change, and demand has failed to keep up in time, making it difficult to rationalize the contradiction between supply and demand leading to the declining boom of PDH industry.

On the other hand, the supply side is expected to grow in the short term. The 600,000 tons/year PDH plant in Yanchang CFL, 700,000 tons/year naphtha cracking plant in Zhejiang Petrochemical, 750,000 tons/year plant in Guangxi Huayi, and 300,000 tons/year PDH plant in Zibo Xintai are expected to produce qualified propylene in the near future. Therefore, propylene market in the case of increased supply, the market continued to rise power is not enough.

To sum up, LNG price is expected to go down in July, and the cost downward has a greater effect on PDH plant profit improvement, but if there is a lack of propylene market, PDH profitability will be lack of foundation. As to whether the profit space of PDH plant can continue to expand later, it depends on the game between the two, if the propylene market falls more in July, it will be more difficult for PDH plant to keep the winning result.


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