Cost demand game, propylene prices may continue to be strong in the short term

This week, the short-term trend of the propylene market presents the characteristics of “cost support and demand resilience coexisting”. The rise in international oil prices provides a stable bottom support for it, forming the foundation for the strong operation of prices.

Price performance
As of December 4th, the benchmark price of propylene in Shengyi Society was 6190.75 yuan/ton, an increase of 0.16% compared to the beginning of this month (6180.75 yuan/ton).
Cost side:
International oil prices rise: On December 3rd, international oil prices rose month on month, providing cost and psychological support. Taking December 4th data as an example, the ex factory price of naphtha is around 7071 yuan/ton.
Supply side:
The main factor supporting the price of propylene is the temporary tight supply in certain regions, such as Shandong. However, this supply contraction is not driven by strong demand, but rather by losses in some facilities and maintenance shutdowns, and its sustainability is questionable.
Demand side:
Downstream demand is the biggest drag on the current market. Especially as we enter the traditional off-season of December, there is an expectation of further decline in terminal demand (such as plastic weaving and home appliances). Downstream factories generally adopt a “rigid procurement” strategy and have a low acceptance of high priced raw materials. From a full year perspective, the propylene market is in a capacity expansion cycle, and the fundamentals exhibit a “weak supply and demand” characteristic. Inventory is at a high level, and the largest downstream polypropylene (PP) market is also under price pressure due to oversupply and off-season demand, which severely limits the upward space of propylene from the demand side.
In summary, short-term propylene prices may fluctuate due to supply disruptions, but in the context of weak demand and long-term loose supply, it is difficult to form a trend upward trend, and it is more likely to manifest as a range oscillation with a “top and bottom” or a “slow adjustment recovery”.