Propylene Prices in China saw a Slight Improvement in January amid Low Upstream Inventory

Propylene prices in China were seen on a rising trend in January 2024 compared to December 2023. The major market dynamics that elevated the propylene price in China were the declining upstream inventories. Procurement Resource reported a m-o-m increase of 0.78% in the propylene prices in China for January 2024.

Despite starting the month on a slackened note, propylene prices rose by mid-January. Although downstream polypropylene market was sluggish, overall, which countervailed (to some extent) the rising propylene price on the back of waning upstream inventory.

The propylene market in China experienced a notable upward trend in January 2024, influenced by the supply and demand factors alongside market sentiment. The month was characterized by tight upstream inventories, which significantly contributed to the push for higher propylene prices. The scarcity in supply and the dynamics of upstream sectors elevated prices for propylene in January 2024.

The closure of some propylene units, particularly in the Shandong region, exacerbated the supply constraints, thereby improving the market atmosphere and prompting active participation from downstream players. This reduction in on-site inventory sustained the upward momentum in propylene prices.

However, as propylene prices increased, it created a challenging situation in the market. This increase led to a smaller difference in price between propylene and its downstream product, polypropylene. As a result, companies producing polypropylene found their profit margins squeezed, especially as the demand for polypropylene began to decline. This situation, combined with the anticipation of some propylene units restarting, introduced a cautious outlook towards the continued rise in propylene prices.

Cost considerations played a mixed role, with upstream fluctuations offering average cost support and downstream derivatives exhibiting mixed responses. The main downstream product, polypropylene, saw a slight increase but not enough to significantly boost propylene demand. The market's cautious approach and the wait-and-see atmosphere suggested a potential for price instability, with a short-term trend possibly leaning towards a downward adjustment.

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According to Procurement Resource, in January 2024, China's propylene market saw a rising trend due to tight upstream inventories, pushing prices up despite a sluggish downstream polypropylene market. With a month-over-month increase of 0.78%, the closure of Shandong units further tightened supply. However, narrowing price differentials with polypropylene and potential unit restarts could temper future rises, amidst mixed cost support and cautious market sentiment.