After New Year’s Day, the price of propylene did show a trend of stabilizing and slightly rising, with a short-term upward momentum, but the overall expected increase is limited. As of January 7th, the benchmark price of propylene in Shengyi Society was 5797.67 yuan/ton, an increase of 1.40% compared to the beginning of this month (5717.67 yuan/ton).
Supply side:
Due to cost pressures, some PDH units are scheduled for maintenance, which may reduce supply. Enterprises in Shandong have low inventory and smooth shipments.
Demand side:
There is an increase in downstream production capacity in the northern market. Entering February, pre holiday stocking may lead to a temporary increase in demand. The overall market supply exceeds demand, and the propylene industry is in an expansion cycle. The loose fundamental pattern is difficult to fundamentally reverse in the short term.
The downstream demand support is limited, and the main downstream polypropylene has high cost pressure. Some units have been shut down. As of January 7th, the benchmark price of PP (drawing) in Shengyi Society was 6253.33 yuan/ton, an increase of 1.35% compared to the beginning of this month (6170.0 yuan/ton). There is some support for the demand for propylene. The sustainability of the upward trend after New Year’s Day needs to be observed, and the key depends on the downstream’s ability to accept it.
Epoxy propane (PO): The profit situation is relatively good (theoretical gross profit exceeded 1500 yuan/ton on January 2), with a high level of production and stable demand. As of January 7th, the benchmark price of epoxy propane in Shengyi Society was 7816.67 yuan/ton, an increase of 1.08% compared to the beginning of this month (7733.33 yuan/ton).
Cost side:
The core contradiction on the current cost side is the conflict between the “low prices” of raw materials such as oil and propane and the “deep losses” of PDH processes. This has led to both downward pressure on cost support and upward momentum due to supply contraction.
Price Outlook
Market average price forecast for January: about 5800 yuan/ton, key resistance level for subsequent increase: 5850 yuan/ton (key observation point for this round of rise). Overall judgment for the first quarter: there is a high probability of a slight rebound in the price center, and it is expected that there will be no strong unilateral rise.
Overall, the current market presents a situation of both short-term rebound and long-term pressure:
Short term opportunities: Tightening supply (low inventory, maintenance expectations) and seasonal demand (pre holiday stocking) are the main drivers of growth. Pay attention to whether the price can effectively break through the 5850 yuan/ton threshold.
Long term pressure: The industrial pattern of oversupply is the fundamental constraint. Although 1.9 million tons of new production capacity are planned to be put into operation in the first quarter, it mainly affects East and South China, with limited direct impact on the main market in Shandong.
Key variables: It is necessary to closely monitor the transmission of international oil price trends to costs, as well as the profits and operating conditions of downstream industries such as polypropylene, which determine the sustainability of the upward trend.
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