1、 Market Overview
As of February 3rd, the benchmark price of propylene in Shengyi Society was 6391.00 yuan/ton, a decrease of 0.21% compared to the beginning of this month (6404.33 yuan/ton). Compared to the previous high, it tends to stabilize. This indicates that after experiencing a rapid price surge in January (with Shandong prices reaching 6405 yuan/ton on January 27th), the market’s upward momentum has weakened, and both buyers and sellers have turned cautious and entered a wait-and-see phase.
2、 Fundamental analysis of supply and demand
The current market’s “temporary stability” pattern is mainly the result of the balance between supply and demand factors.
1. Supply side:
Continued tight equilibrium state: The core factor supporting the price increase in the early stage was the unexpected tightening of supply, especially the operating rate of PDH (propane dehydrogenation) units fell below 60% at one point. Although the overall utilization rate of propylene production capacity is currently 70.93%, it is still relatively low, and enterprise inventory is controllable. In the short term, spot resources are not abundant.
The market’s focus is on the expectation of “storage restart”. Analysis suggests that if the main PDH units in the north restart as planned, it may alleviate the supply shortage and put pressure on market sentiment. This is one of the main sources of the current market wait-and-see sentiment.
2. Demand side:
As downstream factories gradually enter the Spring Festival holiday, actual demand has slightly weakened. The main downstream performance varies. For example, the price of PP powder remained stable at a high level, while the prices of epichlorohydrin and octanol also experienced varying degrees of decline. The downstream’s willingness to chase after high priced propylene has slowed down, making it difficult to support further significant price increases.
3. Cost side:
At present, the profit of PDH process route is still deeply lost (East China -304 yuan/ton, Shandong -444 yuan/ton). From a cost perspective, this provides strong bottom support for propylene prices, and production companies have limited willingness to continue offering discounts. The previously optimistic macro sentiment and financial push have weakened, and the market has returned to focus on fundamental supply and demand.
3、 Short term outlook:
Overall, it is expected that propylene prices will maintain a high volatility pattern in the short term. The price above 6450 yuan/ton is facing significant pressure, mainly due to the seasonal weakening of downstream demand. If the potential device restart progress on the supply side falls short of expectations, as well as sustained loss costs, it will limit the downward space for prices. The key to the post holiday market trend lies in the game between the actual situation of supply side equipment restart and the demand for downstream enterprises to resume work and stock up after the holiday.
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