Lead-in: This week, propylene prices continued to adjust downward to a range acceptable to downstream buyers. Concurrently, escalating geopolitical tensions created a dual positive effect, resonating to improve market sentiment. This prompted industry participants to release restocking demand, driving a rebound and recovery in prices after the decline. As of April 13, the mainstream price in Shandong reached 9,215 RMB/ton, marking an increase of 2.96%. In the short term, cost support is expected to remain robust, coupled with sound fundamentals, suggesting prices still possess upward momentum. The mainstream price may test the high point of 9,500 RMB/ton.

Key Focus for the Future:

1. The progress of maintenance and restart schedules for the Jinneng and Weiyuan plants.
2. The cost linkage impact stemming from the evolution of the geopolitical situation and fluctuations in crude oil prices.

I. Prices Show a Pattern of First Declining Then Rising, Driven by Costs and Restocking

This week, the propylene market exhibited a trend of initial decline followed by a rebound. The core drivers were fluctuations in the cost side, strengthening expectations of reduced supply, and changes in the pace of downstream restocking.

1. Decline Phase (Apr 8 - Apr 10): The Shandong spot market fell from 9,525 RMB/ton on April 8 to 8,950 RMB/ton on April 10, a cumulative drop of 6.04%. This phase was primarily influenced by a pullback in international oil prices and a significant slump in futures, which dampened market sentiment. Coupled with price concessions from some enterprises, this further intensified wait-and-see attitudes among traders. Cautious buying accelerated the downward trend.
2. Rebound Phase (Apr 13): The Shandong spot market recovered from 8,950 RMB/ton on April 10 to 9,215 RMB/ton on April 13, a gain of 2.96%. The rebound was driven by escalating geopolitical conflicts boosting expectations for cost support, and concentrated downstream restocking following the price bottoming out, jointly propelling the market's recovery and strength.

The current recovery pace is relatively sharp. To assess whether prices can reach new highs again, a brief analysis of the fundamentals is warranted.

II. Supply Side: Increased Fluctuations in PDH Operating Rates; Expected Supply Reduction Forms Strong Support

As shown in the chart, overall fluctuations in Shandong's propylene plant operations were limited during the period. Weekly output was 205,600 tons, with the average industry operating rate maintained at 57.49%, indicating supply remains relatively tight.

Looking ahead, the planned maintenance for Jinneng's Phase I PDH unit in the region is expected to materialize. At that time, Shandong's daily propylene output may decrease to approximately 27,700 tons. The supply reduction will continue to provide significant bottom support for the market. However, the Weiyuan PDH unit is expected to restart in mid-to-late April. Considering factors like plant stability, the overall supply increase is expected to be relatively limited. It is projected that Shandong's weekly propylene output for the period (Apr 13-19) will be 197,700 tons, a decrease of 3.85% compared to the previous period, which will be a strong driver for price movements.

III. Demand Side: Downstream Profit Margins Diverge Again; Buying Trend Shifts from Strong to Weak

From a profitability perspective, the decline in feedstock propylene prices allowed for some recovery in the profits of downstream derivatives. Therefore, the阶段性反弹 in propylene has had a limited impact on overall profit fluctuations. Compared to the first working day after the holiday, PDH profits fell by 331%, octanol profits fell by 19%, and PO profits fell by 3%. Only PP powder profits increased by 19%, and acrylonitrile profits increased by 116%. Going forward, if propylene prices continue to climb, they will further squeeze downstream profit margins, thereby constraining enthusiasm for feedstock procurement.

From the perspective of plant operations, the overall operating rates of mainstream downstream sectors in Shandong are relatively weak, covering core categories like PP, octanol, and PO. During this period, multiple units, including those of Dongming Dongfang, Jinneng Chemical, and Yulong Petrochemical, underwent new maintenance. Only the Shida Shenghua unit resumed production. Overall, downstream theoretical demand decreased by 21,000 tons. Subsequently, Lanfan Chemical's unit is scheduled for maintenance, while Zhonghai Fine Chemical and Yulong Petrochemical have restart expectations. With both positive and negative factors offsetting each other, downstream demand overall is expected to remain weak. It is projected that regional downstream theoretical demand will further decrease by 29,600 tons, indicating insufficient support from the demand side.

IV. Narrowing Propylene-PP Spread May Become Key to Price Trend

As shown in the chart, the price spread between the main downstream product PP powder and propylene widened and then narrowed again. The average operating rate of such factories (in Shandong) has dropped to 10%, resulting in weak raw material procurement意愿. Simultaneously, some integrated enterprises continue to release propylene supply externally. If this weak spread pattern persists, it may force operating plants to further reduce loads or shut down, intensifying market supply pressure and continuously suppressing downstream purchasing积极性.

V. Trend Outlook: Short-term Strength with Upward Exploration; Medium-to-Long Term Wide Fluctuations

(I) Short-term Trend: Prices Likely to Continue Exploring Upside
In the short term, cost support expectations remain strong, coupled with sound fundamentals, suggesting prices still possess upward momentum. The mainstream price is expected to test the 9,500 RMB/ton level. Key focus will be on the actual implementation of start-stop schedules for core units like Jinneng and Weiyuan. If Jinneng's maintenance proceeds as planned and the supply increase from Weiyuan's restart is limited, the supply contraction pattern will continue, creating the possibility for prices to break through 9,500 RMB/ton and move higher.

(II) Medium-to-Long Term Trend: Increased Market Variables May Lead to Continued Fluctuations
From a medium-to-long term perspective, the development of the geopolitical situation remains uncertain. Coupled with macroeconomic fluctuations, there are numerous potential disruptions on the propylene supply side, increasing market variables. Concurrently, overall downstream operating rates are weak, profit recovery is limited, and acceptance of high raw material prices is under pressure. Constraints from the demand side persist. Therefore, the propylene market is likely to experience fluctuations, with prices expected to oscillate within a range around 9,000-9,500 RMB/ton.