Propylene prices fell sharply in March and fluctuated more than expected. While the price of propylene has changed dramatically, the prices and profits of many downstream products are also constantly changing, and there are many consistencies and differences with propylene. Overall, the correlation between propylene and downstream products is still strong, and the supply and demand side is still the main factor affecting the propylene market in the later stage. The propylene market will be stabilized in the short term, and the price fluctuation space will be significantly reduced.

In March, the propylene market was very busy, with market prices falling sharply at first and then rising sharply. The mainstream price of propylene in Shandong Province dropped from 7600 yuan/ton in late February to 6400 yuan/ton, a drop of 15.8%, while the current price has risen to 7300 yuan/ton, an increase of 14.1%. Recently, the market has entered a stable period, and the mainstream price of propylene in Shandong has stabilized at 7200-7300 yuan/ton.

There are many downstream products of propylene, and there is a strong correlation between propylene and many downstream market changes. Propylene prices soared and plunged in March, so what is the downstream market trend?

In March, the downstream of propylene showed a high-opening and low-going trend, and the prices of most products have declined by different margins compared with the beginning of the month. The main reason is that on the one hand, the supply and demand of different products are different. On the other hand, the sharp change of raw material propylene price also leads to the continuous change of downstream product cost, which has a greater impact on the market trend.

From the point of view of specific products, only acrylonitrile prices in downstream products have increased since the beginning of the month, mainly supported by the overhaul of the outer disk and marine power plant. The prices of other downstream products have fallen, of which epichlorohydrin and acetone have fallen relatively large, mainly due to the contradiction between supply and demand.

It is difficult to see the correlation between propylene and downstream price changes. Compared with the downstream, propylene price changes frequently and quickly. In about half a month, propylene has experienced a sharp fall, a sharp rise and a stable price, while most downstream prices change relatively slowly.

From the monthly average, the average price of propylene in March was 7.84% lower than that in February, and the price center continued to move downward. Among the downstream products, the average price of acrylonitrile and octanol in March was higher than that in February, while the prices of other products declined by different ranges.

From the monthly average price comparison, it can reflect the correlation between the price changes of propylene and downstream products. Propylene price center of gravity declined, downstream product cost support weakened, price center of gravity also fell. Although sometimes downstream product price changes will lag behind, but the market remains consistent. However, downstream product prices fell less than propylene, which also reflects the weaker propylene market.

Judging from the downstream profit situation, up to March, the downstream still maintains a large profit margin, and most downstream products’profits have risen by different margins compared with February.

As we mentioned above, the average price of most downstream products in March has declined by different margins compared with February, but the profit margin has increased. This shows that the main reason for the expansion of profit margin of downstream products lies in the large drop in cost, i.e. the large drop in the gravity center of propylene price, which is verified by the previous analysis. This indicates that the profit of propylene industry is transferred from propylene downstream in the near future, and the direction of transfer may change in the later period.

Outlook for the future

After a sharp decline and rise, the propylene market has stabilized in the near future, and the price center of gravity has returned to a relatively reasonable space. However, the recent market of some downstream products is relatively weak, and the price focus has continued to decline. This reflects the trend of price recovery between propylene and downstream, with some downstream profit margins narrowing expectations.

In the later stage, the supply and demand side is still the most important factor affecting propylene, which needs continuous and close attention. On the supply side, the spring overhaul season has been gradually opened, and some refineries in Shandong have entered the overhaul; on the outside side, some equipment in Japan, Korea and other places are also expected to be in stock for overhaul, and the supply of the outside will gradually decline. Reduced supply will boost the market mentality and substantially reduce the supply pressure of enterprises. On the demand side, downstream demand needs to continue to recover. The impact of the continued decline in polypropylene futures and spot prices on the stock and profit margins of the propylene market, and some downstream maintenance facilities need to be restored. Overall, propylene market pressure is expected to ease in the later period, but the range is limited. As far as the current situation is concerned, the mainstream price of propylene in Shandong Province is relatively reasonable between 7000-7500 yuan/ton. There will be no sharp rise or fall in the market in the short term, and stable consolidation will be the mainstream trend.

According to media reports, since the beginning of 2019, the price of disperse dyes has come to an end, and related products have witnessed two rounds of increases on January 1 and February 12. Recently, the transaction of disperse dyes has been gradually active, and a new round of increase was welcomed on March 18.

At present, the dyestuff demand peak season has come, dyestuff demand of printing and dyeing enterprises will increase, and this year, the stock of printing and dyeing enterprises and distributors before the Spring Festival has decreased compared with previous years, which will further increase dyestuff rigidity demand of printing and dyeing enterprises. It is expected that the factory price of disperse dyes will continue to rise in the first half of this year, and the performance of industry companies is expected to improve. Relevant companies include Zhejiang Longsheng, Runtu Shares, Jihua Group, etc.

Last weekend, Dow Chemical, the silicone giant, announced an overall increase in the prices of siloxane, polymers, sealants and silicone rubber, up to 10%, with the new price coming into effect on April 1. Other silicone manufacturers and traders, such as Xinyue, Wake, KCC and Maitu, have been following up the price increase, ranging from 5% to 10%.

Institutional data show that in the first week of March, the domestic silicone market transaction price increased by about 300 yuan/ton. Last week, the transaction price continued to rise by 500 yuan/ton.

Wake Chemicals is responsible for organosilicon business executives told reporters that organosilicon prices have risen all the way since the Spring Festival this year, especially upstream, with different varieties, with an average increase of 10% to 15%.

According to the analysis, the price increase of silicone originates from the rising downstream start-up rate and considerable stock reserve. It is said that the stock of many large downstream factories has been increased to the end of March, resulting in compact single factories row orders, low inventory, organic silicon intermediate DMC quotation continued to pull up.

Baichuan information data show that since March, the start-up rate of domestic organosilicon monomer device 3 has gradually increased, and at present, the start-up rate of domestic devices has been maintained at more than 80%. As of March 14, the total production capacity of single unit units in 14 major domestic monomer production enterprises was about 3.035 million tons.

“At present, the monomer enterprises start work normally, but the inventory is still at a low level. With the active downstream orders, the peak season of superimposed demand is gradually coming, and the price probability of silicone continues to rise. Yang Owen, an analyst at Chuancai Securities, said.

The downstream of silicone industry chain also transfers cost pressure through price increase. Following the price increase letter issued by silica gel enterprises at the end of February, only half a month later, some silica gel enterprises issued another price increase letter last week, announcing the price increase of their products.

“With the construction and other industries start to improve, the downstream products of silicone entered the peak demand season in March.” Pu Qiang, an analyst at the Resource and Environment Research Center of Guojin Securities (600109), believes that after a rapid decline in the previous period, the price of silicone products has fallen to a historic low. At present, downstream enterprises have a good desire for low-price purchasing, and the demand for purchasing has also rebounded. The industry is in a state of booming supply and demand. The overall price of products has rebounded, and the profit margin of enterprises has been restored.

“At present, the enterprises are fully started, the market is booming both in supply and demand, the inventory is at a low level, and the downstream orders are in good condition.” Li Wenjing, an analyst at Open Source Securities, predicts that the market will continue to warm up as the peak demand season approaches.

Analysis of Coal Transport Railway and Port Operation around Bohai Sea

Last year, 2.38 billion tons of coal were transported by national railways, an increase of 10.3%. Among them, the Daqin Line completed 451 million tons of cargo, Shuohuang Line completed 316 million tons of cargo, Mongolia-Hebei Line completed 54.05 million tons, Wari Line completed 33.95 million tons, all increased year on year.

This year, China’s economic construction continues to develop rapidly, urbanization is speeding up, electricity consumption of the tertiary industry and residents is expected to maintain growth momentum, and coal demand remains growth momentum. This year, it is expected that the Daqin Line will deliver 455 million tons of goods, the Shuohuang Line will complete 32-330 million tons of goods and the Mengji Line will complete 7-80 million tons of goods.

Looking back last year, the Da-Qin line completed 451 million tons of cargo, of which 401 million tons were flowing to the Bohai Rim Port and the rest to the Beijing-Tianjin-Hebei Power Plant. In sub-ports, the Daqin line flows to 203 million tons of coal in Qinhuangdao Port, 123 million tons in Jingtang Port and 74.29 million tons in Caofeidian Port.

Last year, Guotou Jingtang Port completed its coal throughput of 5.39 million tons, mainly relying on the Daqin-Cao Railway Line, all of which come from the Daqin Railway. The total coal throughput of Beijing-Tang Laogang is 32.14 million tons. It mainly relies on the Daqin-Qiancao-Luangang Railway Line, and the gathering ports are all from Daqin Line. The 36-40 Luan berth in Jingtang Port has a coal throughput of 40.81 million tons. It mainly relies on the Daqin-Qiancao-Luangang Railway Line, and the gathering ports are all from the Daqin Line.

Last year, CITIC completed 71.3 million tons of coal throughput in Caofeidian Port, 34.39 million tons in the second phase of Caofeidian Coal and 22.65 million tons in Huaneng Caofeidian Port. The above coal resources come from 74.29 million tons of Daqin line and 54.05 million tons of Mengji line.

Last year, the Shuohuang Railway completed 316 million tons of freight traffic, an increase of 2.7% over the same period last year; the annual coal traffic exceeded 300 million tons for the first time. Coal mainly flows to Huanghua Port and Tianjin Nanjiang Coal Terminal, and part of it flows to the power plants along the line. Last year, Huanghua Port completed coal throughput of 203 million tons, while Shuohuang-Huangwan Line formed a supply support for Tianjin Shenhua Coal Terminal. Last year, Tianjin Shenhua Coal Terminal completed coal throughput of 45.1 million tons.

This year, the planned shipment volume of Daqin Line is 455 million tons. Affected by the competition between Mongolia-Hebei Line and Shuohuang Line, part of Inner Mongolia’s resources flow to Mengji and Shuohuang Line, resulting in increased market competition pressure. In addition, the construction of Qinhuangdao Port, the supporting port of Daqin Line, without follow-up coal terminal in Hong Kong, has limited the annual coal shipment volume of Qinhuangdao Port to 18-210 million tons, and the possibility of a substantial increase is very low. In the next few years, the annual traffic volume of Daqin Railway will remain basically 450 million tons, with little room for increment.

This year, the volume of goods shipped on the Shuohuang Line is expected to be limited compared with last year, reaching 320-330 million tons. The throughput of its supporting port, Huanghua Port, has increased slightly from last year. This year, the coal throughput of Huanghua Port and Shenhua Coal Terminal in Tianjin is expected to reach 21.1 million tons and 45 million tons respectively.

This year, the increment of the Mengji Railway Line is between 2000 and 30 million tons, and its supporting ports, Caofeidian Port III, are relatively abundant in transport capacity; the designed transport capacity of the three ports is 200 million tons, and the coal throughput of the three ports completed last year is 125.34 million tons, and the throughput will continue to increase.

With the increasing proportion of natural gas in energy consumption, coal bed methane and other unconventional oil and gas resources have great potential to supplement.

Coalbed methane (CBM) is a hydrocarbon gas occurring in coal seams, mainly composed of methane, adsorbed on the surface of coal matrix particles, partially dissociated in coal pore or dissolved in coal seam water. It is an associated mineral resource of coal and belongs to unconventional natural gas.

The Thirteenth Five-Year Plan for the Development and Utilization of Coal-bed Methane (Coal Mine Gas) proposed that by 2020, two or three industrial bases of coalbed methane should be built; the extraction capacity of coalbed methane will reach 24 billion cubic meters, of which the surface production of coalbed methane is 10 billion cubic meters and the utilization rate is more than 90%; the extraction rate of coalbed methane is 14 billion cubic meters and the utilization rate is more than 50%; the installed capacity of coal-bed methane power generation is 2.8 million kilowatts, and the 80 thousand households.

Dominant geometry

“China is one of the countries with the richest reserves of coalbed methane in the world, but due to the limitation of mining technology, the production of coalbed methane needs to be improved.” Randeep S. Grewal, president of CBM Exploration and Development and Producer G3 Exploration Co., Ltd., told First Finance and Economics: “China has large reserves of coal resources. Before mining, it is necessary to extract CBM, otherwise it will endanger the safety of miners. In addition, even if the coal mine is not mined, CBM will naturally slowly escape into the atmosphere and become one of the sources of greenhouse gases.

It is known that if CBM is directly discharged into the atmosphere, its greenhouse effect is about 21 times that of carbon dioxide. As a fuel, its calorific value is equal to that of natural gas, and it is a clean energy which can be mixed with natural gas. The gas explosion rate of coal mine will be reduced by 70% to 85% if gas is extracted before coal mining.

Open data show that China’s CBM reserves account for about 15% of the global total, ranking third in the world, behind Canada and Russia. However, due to the complex geological environment, coal seams are fragile, faults are serious and permeability is low, there are many technical challenges.

“In the course of more than 20 years’development in China, we have seen that many foreign and local enterprises are interested in CBM, but many companies have left this field because of technology and other reasons.” G3 Exploration Co. Ltd. developed LiFabric technology, which allows drilling bits to cross multiple faults in a single well through a drilling solution for sieve pipes beneath fragile coal seams, Grivo said.

At present, G3 Exploration Co., Ltd. has eight blocks in China, mainly located in Shanxi, Jiangxi, Anhui and Guizhou. It has 559 billion cubic feet of 2P reserves and 2386 billion cubic feet of 3P reserves. Among them, 47% of the participants in Chengzhuang District, Shanxi Province, and 53% of the partners in Petroleum. 147 wells are expected to be drilled in the southern Shizhuang block of Shanxi Province in cooperation with CNOOC. The way of cooperation is to sign the product sharing contract, arrange different operators according to the contract, and operate through JMC.

“Two of the eight blocks have been commercialized. At present, 1 600 wells have been completed, of which 500 wells have been sold. In the next 12 and 18 months, more gas will be supplied. Some of the coalbed methane produced at present will enter the pipeline of West-East Gas transmission, and some will be used in power plants and downstream gas stations.” Grivo said.