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Downstream demand is expected to increase, and propylene will usher in a stable market in the short term

TIME：

2020-12-31

　　December entered the middle and late ten days. On the one hand, the heavy pollution weather warning was restarted in Shandong, and the load of road transportation and downstream factories started to be affected. On the other hand, the main downstream polypropylene powder factories are under greater pressure, and the price difference with pellets is small, with no obvious advantage. On the demand side, power cuts and environmental protection are under double pressure, resulting in a shrinking terminal demand and a significant decline in operating rates. Under the lack of good support in the market, the weakness of propylene cannot be concealed, and the center of gravity of the offer continues to decline. As of December 31, the mainstream reference in the Shandong propylene market was 7100-7150 yuan/ton, a decrease of 550 yuan/ton from the beginning of the month.

　　Data source: Longzhong Information

　　So can propylene stop falling and stabilize? Let's take a look at the supply and demand side.

　　1. There is still room for profit in the three processes

　　Data source: Longzhong Information

　　At present, the profit margin of PDH process is gradually narrowing, and the cost of other oil production and methanol production of propylene is still supported by good profits. At present, the profit of naphtha to propylene is maintained at 200-300 US dollars/ton; the profit of PDH is maintained at 100-500 yuan/ton; the profit of methanol to propylene is maintained at 300-400 yuan/ton.

　　2. The overall supply in the domestic market is sufficient

　　Shandong market: The 180,000 tons/year MTO plant in Luxi has not yet restarted, and the specific restart time is to be determined. At present, the supply in the region is sufficient, and the inventory pressure of some production enterprises has eased, but the inventory of individual enterprises remains high.

　　Northeast China: Jilin Cornell's 170,000-ton/year MTO plant, Longyou's 200,000-ton/year polypropylene plant, and Jishen's 100,000-ton/year PO plant continue to shut down, and there is no restart plan yet. At present, the circulation of goods in the region has increased slightly, the overall inventory of production enterprises is still acceptable, and some enterprises are under a little pressure.

　　North China: Haiwei Petrochemical's 500,000-ton/year PDH unit operated smoothly. The long-term supply of Tianjin Bohua Chemical and Tianjin Petrochemical remained at a normal level. In addition, it is understood that Tianjin Bohua's 600,000-ton/year PDH device will be stored and overhauled in January, and the specific time is to be determined.

　　East China: The 450,000-ton/year MTO plant in Sailbone is scheduled to restart in early January. At present, the supply of goods in the region is sufficient, and some enterprises in Zhejiang still have pressure on shipments, while the overall situation in Jiangsu is acceptable.

　　3. The main downstream profits rebounded, and the demand is expected to increase

product	Price (yuan/ton)	trend	Operating rate	Theoretical profit (yuan/ton)
PP powder	7900-7950	Uplink	60.76%	80-100
octanol	11700-11800	smooth	98%	4600-4700
Butanol	8900-9200	downlink	77%	2900-3000
acrylic acid	7500-7700	smooth	66%	600-700
Propylene oxide	18700-18800	Uplink	82.34%	9000-10000

　　Data source: Longzhong Information

　　We still take the main downstream polypropylene as an example. With the recent lifting of electricity restrictions and environmental protection policies in East China and Shandong, the downstream plastic woven industry has recovered, and the overall start-up load has slowed down, which has driven market transactions. At present, the price of powder materials shows a trend of small rise after falling, and the theoretical profit recovery at the same time may drive the enthusiasm for raw material procurement. Other downstream companies also maintain good profit margins, so the overall demand is expected to increase.

　　On the whole, although the shipping pressure of some production enterprises still exists, the current downstream has a certain profit space, and the willingness to purchase raw materials may increase. Therefore, we believe that the propylene market is expected to usher in a short-term stabilization of the market.

　　Author: Qi Juan

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