Entering 2021, as countries end the lockdown period, economic activities recover, and the COVID-19 vaccine shows promising results, the global propylene market may be supported by strong demand from the polypropylene industry.
Propylene market participants said that with the advent of vaccines and the resumption of travel, demand from the automotive industry is also expected to increase. Tight supply in some regions will also support the global propylene market.
In Europe, due to labor and logistics challenges caused by the epidemic, the shutdown and maintenance of some cracking plants has been postponed from 2020 to 2021. There are currently at least 4 overhaul plans to be carried out in 2021, some of which will be carried out in the first half of the year, which may reduce market supply.
Participants also predict that European refineries will continue to operate at a lower operating rate in the first half of the year as people travel less and continue to work from home, and fuel demand decreases. The lower operating rate may affect the supply of propylene, especially petrochemical products.
According to data from S&P Global Platts, with the recovery of gasoline demand, the operating rate of the residue catalytic cracking unit may increase in 2021, but the increase is limited. Analysis predicts that in 2021, the average operating rate of RFCC will rise from 75%-76% in 2020 to 79%-80%.
In Asia, the operation of new downstream PP plants in South Korea is expected to reduce the country's propylene exports.
The two PP plants owned by SK Advanced and Hanwha Total, with a total of 800,000 tons of PP production capacity per year, are expected to be put into operation in the first half of the year. No new propylene production capacity will be added before the second half of the year. South Korea is China's main supplier of propylene. "This means that South Korea's exports to China have decreased." A South Korean producer said. Before the new facility in South Korea is put into operation, there will be a supply gap for propylene.
China's supply increases
Market participants will pay close attention to the growth of China’s independent new propylene production capacity in 2021, as this will affect China’s import demand.
An international trader said: "In the first half of the year, a large number of new production capacity will be launched soon, and the growth in demand is not as large as the increase in output."
Dongfang Energy is expected to complete the construction of a new 660,000 tons/year PDH plant in Ningbo and two downstream 400,000 tons/year PP plants by January 2021, while Fujian Meide Petrochemical’s 660,000 tons/year PDH plant will be completed by the end of December It is put into production, and it is expected to produce propylene according to specifications before January 2021.
An international trader said: "If Fujian Midea can start the PDH device on time this time, then China's dependence on imports can be reduced." Fujian Midea is China's largest propylene importer and also purchases domestically to satisfy The demand for its two 500,000 tons/year PP plants.
China's propylene imports are expected to continue to decline in 2021, which is in line with China's growing production capacity. According to customs data, China's propylene imports from January to October fell 19.5% year-on-year to 2.06 million tons.
European arbitrage
Due to rising domestic prices in the United States, the flow of U.S. propylene to Europe will stop in 2020. Market participants expect that in the first half of 2021, arbitrage opportunities will still be closed. Rising demand, insufficient imports and planned shutdowns may make Europe's propylene supply tight, although this will be limited by the degree of demand recovery.
Market sources said that in the United States, due to continued tight supply and strong downstream demand, prices in the second and third quarters have been at a mid-to-high level of 30 cents per pound, and it is expected that they will continue to remain within this range in the first half of 2021.
Refinery operation rate
In the United States, the price of refinery-grade propylene fell to its lowest level in 18 years in the first quarter driven by the high operating rate of refineries. According to the US Energy Information Administration, at the 18-year low, the domestic refinery operating rate was 82.3%.
Due to the price reduction, the upstream propane supply and derivative propylene supply have tightened, and the price has begun to rise again, and has been stable at a high level since the third quarter.
Source: Chemical Network
