Propane surge, PDH losses
2023/8/31
Specifically, firstly, the upward momentum of propylene is insufficient. At present, naphtha cracking still accounts for a relatively large proportion of domestic propylene process routes. However, in recent years, the PDH process has taken an absolute advantage in new installations due to its low-carbon, environmentally friendly, short process, and single raw material characteristics. In July, with the production of Binhua New Materials and Huahong Phase II propylene projects, the proportion of PDH propylene production process increased to 27%, becoming the second largest process for propylene production. There is still significant room for improvement in the later stage, and the continuous release of new production capacity will bring pressure to the propylene market. At the same time, the important downstream polypropylene futures trend of propylene has weakened, and the pressure on propylene factory shipments has gradually increased. Market transactions have declined, and the upward trend of manufacturers' quotations has slowed down before loosening and lowering. It is expected that the domestic propylene market may be weak and downward in the short term.
Secondly, the price of propane does not have a significant downward basis. Under the positive impact of downstream bottoming and inventory replenishment, strong external market rise, typhoon induced decrease in port cargo volume, and increased refinery maintenance quantity, propane prices have started a crazy upward trend since late July, with almost no downward trend, showing a continuous upward trend. Although high-priced propane is currently facing downstream resistance and the market is showing a trend of peaking and falling, there is still an expectation of an increase in oil and gas import prices in September, which continues to support the domestic market. In addition, considering the decrease in the spot volume of imported propane at the port, there is not much pressure on domestic sales, and the market still has some confidence in the future, it is expected that there is not much room for the decline of propane in this round.
The third issue is that PDH's profit margin is thin, and it is difficult to improve in the short term. The main raw material of the PDH device is imported propane. From experience, the price of propane is completely positively correlated with the price of propylene. A higher price of propane will drive up the cost of propylene and increase the price. However, there is a negative correlation between PDH capacity utilization rate and propylene price. The higher the PDH capacity utilization rate, the lower the propylene price. At present, the price of propane has skyrocketed, and the procurement costs of PDH enterprises have increased. However, there is insufficient follow-up on downstream products, and the profit situation of PDH devices is worrying. The expectation of high costs continues to increase the cost pressure on PDH enterprises, and there are many obstacles to overcome the loss dilemma. However, if the operating rate of the PDH industry continues to decline, exchanging quantity for price and increasing the momentum of the propylene market, it may also change the current unfavorable market situation.
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