In 2023, the propylene market in China showed a “V” shaped trend, with a sustained decline in the first half of the year and a weak rebound in the second half. Taking Shandong propylene as an example, the average price at the beginning of the year was 7244 yuan/ton, and the average price at the end of the year was 6965 yuan/ton, with a year-on-year decline of 3.85%. The highest point of the price appeared at 7695 yuan/ton at the end of February, and the lowest point appeared at 6155 yuan/ton in mid June. The highest point of the price decreased by 20.01% compared to the lowest point.

From the annual trend of propylene in recent years, it can be seen that the market price in 2023 has mostly been lower than previous years, especially in the first half of the year when the decline was significant and the rebound in the second half of the year was weak. Especially in the traditional peak season of gold, silver, and ten, there were no bright spots in the trend of propylene. What specific factors have caused the propylene market to show such a trend? Let’s take a look at the specific reasons.

Supply side: 2023 is still a stage of rapid expansion of propylene production capacity. According to statistics, in 2022, China’s propylene production capacity maintained stable growth, with an additional production capacity of 5.74 million tons/year and a total production capacity of 56.68 million tons/year, an increase of 11.3% year-on-year. The period from 2023 to 2025 is still the peak period for propylene production capacity, and the propylene production capacity using PDH as the production path will converge and start production. It is estimated that China’s propylene production capacity will reach 67.938 million tons/year in 2023. The successive deployment of new production capacity has had a certain negative impact on the propylene market, demonstrating the price trend of small increases and large decreases in the propylene market in 2023.

Demand side: The propylene demand market is also expanding in 2023, but the growth rate of demand cannot keep up with the expansion speed of propylene. Taking the main downstream polypropylene as an example, the production of polypropylene powder in the first half of 2023 has consistently been less than 40%. In the first half of the year, the value trend of propylene and powder materials was normal, with a small value gap between the two. The profit of powder materials was severely inverted, and the pressure on the powder industry was high. Risk was reduced through load reduction and parking. Although there was a peak season in the second half of the year, the market did not meet expectations and was ultimately dragged down by terminal demand, resulting in a dismal ending at the end of the year.

Cost wise: In the first half of 2023, the trend of propylene and crude oil was roughly consistent. However, in the second half of the year, there was a divergence starting from October. The easing of the Palestinian Israeli issue combined with the weakening of crude oil supply and demand reality led to a decline in oil prices since October 20th. As of mid December, most of the increase since July has been recouped, while propylene prices remained fluctuating within the range until the end of the year. It can be seen that the trend of crude oil is also an important influencing factor for propylene, but it is not the only influencing factor.

Market forecast: 2024 is still the peak period for propylene production capacity investment, and propylene production capacity using PDH as the production path will be intensively put into operation. Based on the comprehensive analysis of crude oil and supply and demand, the pressure on the supply and demand as well as cost in the propylene market will continue to rise in 2024. It is expected that the center of gravity of propylene prices may continue to decline compared to 2023. However, due to the continued high volatility of international crude oil expectations and the good support of propylene costs, the expected decline is relatively controllable. Taking the Shandong market as an example, it may fluctuate within the range of 4000-6000 yuan/ton in 2024, with a high-frequency fluctuation range of 5500-6000 yuan/ton. It is expected that the market price will have a low point in the first quarter and a high point in the third quarter.