Increased supply pressure in the propylene market or downward pressure on prices
2023/11/22
Recently, the fundamentals of the domestic propylene market have been in a long and short game. On the one hand, although the parking and maintenance status of some PDH large factories in Shandong and North China has continued, the positive impact on the propylene market has already been digested, and the supporting role of supply on the propylene market is limited; In terms of demand, the downstream powder and terminal market is cold, and the spot price of powder is weak. Although polypropylene futures have rebounded in mid month, the boost to the spot price of powder is limited. Last week, the price difference between Shandong powder and propylene was only around 200-250 yuan/ton, and downstream consumption capacity is low, dragging down the weakness of the propylene market. However, with the price correction in the propylene market, the price difference between powder and propylene returned to 350 yuan/ton on the 20th, which can basically cover the fixed production cost of powder. Although the powder industry is still in a loss making state, downstream procurement enthusiasm has relatively rebounded, and the trading atmosphere on Monday was slightly better than last weekend.
On the other hand, the cost support of the propylene market is relatively strong. Last week, the closing price of international crude oil futures plummeted, but then rebounded significantly. The production cost of propylene remains high, and the profit from oil to propylene has always remained below the profit and loss line; In terms of propane dehydrogenation, the center of gravity of Asian propane spot prices fell in November, closing at $680/ton last Friday. Currently, the international spot price of propane is at the lowest point of the month, but domestic propylene prices have fluctuated and declined. The profit loss of PDH production is still above 500 yuan/ton, and the state of significant loss of propylene continues. The enthusiasm of enterprises to start construction is not high, and the market supply pattern remains controllable.
In late November, as the price of propylene fell, downstream buying enthusiasm rebounded, and factory shipping pressure eased. Propylene prices may stop falling and rise slightly within the week, but short-term basic guidance is limited, and the supply-demand game situation continues. The domestic propylene market may continue to fluctuate. In the later stage, as the traditional off-season in the chemical industry, winter is difficult to see a significant rebound in downstream consumption demand for propylene. At the end of the year, most of the new production capacity may be in East and South China, and some new propylene plants in Shandong may be postponed to production next year. In the future, the focus will be on the follow-up news of domestic early parking devices. If the maintenance devices restart, it is expected that the supply pressure in the propylene market will increase, and market prices may come under pressure.
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