Demand drag effect becomes prominent, putting short-term downward pressure on the propylene market.

【Introduction】 This week, domestic propylene prices experienced a rapid surge followed by a downturn, with the core restraining factor concentrated on the demand side. Sustained high propylene prices significantly raised downstream production costs, eroded derivative profit margins, slowed the pace of market demand-based procurement, and notably weakened buyers' willingness to purchase. As of July 16th, the average mainstream price of propylene in Shandong was 8,850 CNY/ton, down 1.67% week-on-week. In the short term, the dragging effect from demand has intensified, market participants are strongly cautious, restocking operations are more prudent, and the propylene market is under pressure with a downward trend.

I. Supply Side: Centralized Unit Restarts Drive Steady Weekly Output Recovery

Table 1 Overview of Unit Dynamics in Shandong (10,000 tons/year, 10,000 tons)

Data source: Chempricehub Information

This week, supply-side increments in the Shandong propylene market were released intensively. The restart and load increase of two propylene units at Xintai Petrochemical and Yulong Petrochemical pushed the industry operating rate to 66.81%, with overall output showing a steady growth trend. It is estimated that in the week of July 13-19, Shandong's weekly propylene output will reach 237,600 tons, an increase of 8,200 tons week-on-week. Additionally, the restart of the 500,000-ton/year PDH unit at Haiwei Petrochemical in North China restored contracted supply, while some integrated refining and chemical companies intermittently released external propylene sources, further expanding market circulation supply. Continued pressure on the supply side is likely to become one of the core logics constraining short-term propylene price trends.

II. Demand Side: Maintenance Drags Demand, Market Support Insufficient

This week, propylene prices rose sharply, further intensifying the profit divergence among downstream derivatives. Among these, the profits of n-butanol, propylene oxide, acrylic acid, and phenol-ketone improved simultaneously, with n-butanol showing the most significant recovery. Its average weekly gross profit was -438 CNY/ton, up 390 CNY/ton week-on-week. Although feedstock propylene prices rose, the supply-demand fundamentals of these products provided support, allowing price increases to fully cover cost increases and repair processing margins. In contrast, losses for acrylonitrile, octanol, and PP powder deepened, with acrylonitrile deterioration being the most prominent. Its average weekly loss reached 1,368 CNY/ton, expanding by 984 CNY/ton week-on-week. This week, the dual feedstock prices of propylene and synthetic ammonia rose simultaneously, while acrylonitrile spot markets were weak. Costs continuously eroded processing profits, leading to a significant expansion in loss ranges.

Table 2 Fluctuation Overview of Downstream Units in Shandong (10,000 tons/year, 10,000 tons)

Note: These data are theoretical values, calculated based on product output and consumption rates, and are for trend reference only.

From the perspective of downstream unit operations, multiple new maintenance shutdowns occurred this week for PP, octanol, propylene oxide, n-butanol, and other categories in the region. These shutdowns were mostly due to planned maintenance or economic shutdowns under cost pressure. Only the Qixiang Tengda acrylic acid unit completed restart and resumed production. Comprehensive calculations show that downstream theoretical propylene demand decreased by 18,200 tons week-on-week, indicating overall demand support remains weak.

III. Spread Side: Deep Inversion Between PP Powder and Propylene, Bearish Sentiment Heats Up

This week, due to the geopolitical conflict between the US and Iran, international oil prices surged strongly, pushing feedstock costs sharply higher. The processing spread between PP powder and propylene quickly narrowed, with the market once seeing a deep inversion of 250 CNY/ton, putting PP powder production entirely into loss. Most PP powder enterprises successively reduced loads or implemented temporary shutdowns to avoid losses, while some integrated companies opted to sell their own propylene feedstock externally and reduce powder output. The inversion of feedstock costs combined with downstream production contraction intensified bearish market sentiment, further suppressing purchasing activity.

IV. Cost Side: Geopolitical Risks Persist, Oil Prices Provide Floor Support

This week, the US-Iran conflict continued to escalate. The US resumed maritime blockades, and Iran restricted strait navigation, raising market concerns about crude oil supply disruptions and driving oil prices significantly higher. As of July 15th, WTI stood at $79.60/barrel, up 10.43% from July 9th; Brent stood at $84.95/barrel, up 11.34% from July 9th.

Looking ahead, geopolitical risks in the Middle East have not subsided. The current shipping congestion in the Strait of Hormuz and the contraction in oil tanker traffic are unlikely to reverse in the short term. Market concerns about reduced crude oil supply will persist, and the pattern of high international oil prices oscillating at elevated levels has strong certainty. Crude oil and naphtha, as core upstream feedstocks for propylene, will continue to transmit price strength to the propylene chain, providing rigid floor support for spot markets.

V. Trend Outlook: Short-Term Pressure Downward, Potential for Reversal Later

The current core contradiction in the market lies between a loose supply pattern and weak downstream demand. The demand side exerts strong drag, and propylene prices are generally expected to maintain a weak performance. However, considering that the uncertainty of the Middle East geopolitical situation remains unresolved, and some supply units also have expectations of volume reduction, Chempricehub Information believes the first support point is temporarily set at an average price of 8,500 CNY/ton. If no effective supporting factors emerge in the market, the average price may further decline to around 8,200 CNY/ton.

Risk Prompts

Upward Driving Risks:

1. Continued escalation of the US-Iran geopolitical conflict, with shipping disruptions in the Strait of Hormuz driving crude oil sharply higher, strengthening propylene cost support.
2. Unexpected maintenance or load reduction of propylene units in the region, tightening commodity supply.
3. Profit recovery in downstream derivatives, with concentrated terminal restocking driving demand volume.

Downward Suppression Risks:

1. Concentrated restart of multiple propylene units adding supply, keeping the market loose.
2. Concentrated maintenance of downstream units, leading to a sustained decline in theoretical propylene consumption.
3. Easing of the Middle East situation, causing a significant pullback in international oil prices and weakening cost support.