Thread Content
Industry experts expect that the global propylene and polypropylene (PP) markets will see new supply entering the market in 2023, intensifying competition for market share on a global scale as well as price competition among different regions. Against this backdrop, upstream propylene may face difficulties due to low profit margins in the downstream PP sector; in the current environment of high oil prices, companies that have an advantage in raw material costs will hold a competitive edge. Asia at Risk of Surplus In Asia, due to high operating rates of upstream refineries and reduced activity in downstream processing industries, a general surplus of propylene and PP is likely to persist through the first half of 2023. An industry insider said, “By the end of 2022, PP inventory levels in the Asian market were lower than in 2021, but they were still significantly higher compared to previous years.” However, it is unlikely that PP plants in the Middle East will reduce their PP production in order to gain market share. ” On the other hand, the recovery of the PP market in Southeast Asia depends on China, as the market in that region is hindered by currency depreciation and rising living costs resulting from cuts to subsidies for fuel, electricity, and food in 2022. A source based in Southeast Asia said, “We expect more PP goods to flow into Southeast Asia from the Middle East, especially given the weak global demand. The Middle East has an advantage in terms of raw material costs, and local producers are not afraid of competition.” ” Meanwhile, due to declining production profit margins, South Korea’s spot propylene supply is set to decrease. The producer YNCC has postponed the restart of its 450,000-ton/year No. 1 cracking unit, while LG Chem will shut down its 450,000-ton/year No. 2 cracking unit in the second quarter of 2023. Persistent bearish sentiment in Europe: Due to weak demand and a lack of market competitiveness, the bearish trend in Europe’s propylene market will continue in 2023. A trader said, “Everything is still under pressure, and this situation will continue.” ” Due to supply constraints caused by unplanned shutdowns and strikes in propane cracking plants, prices of propylene in Europe are rising from their historical low of 460.50 euros per ton set on September 13, 2022; however, spot trading remains sluggish as consumers face macroeconomic pressures. Market analysts estimate that weak demand fundamentals are expected to recover from their seasonal lows in the first half of 2023, but inflation and the ongoing Russia-Ukraine conflict could prolong the period of weakness across the market. The uncertainty and pessimism in the propylene market have spilled over into the downstream PP market, with market participants expecting an unstable balance between high production costs and weak demand to persist in 2023. Support in the U.S. Market analysts expect that prices in the U.S. propylene market may be supported in the first half of 2023, but the new demand for PP from downstream industries is unlikely to exceed the new supply resulting from the commissioning of new production capacity. Due to rising interest rates and high inflation reducing demand for polypropylene downstream, prices of polymer-grade propylene in the U.S. market dropped by over 60% from March to December 2022. PP prices dropped by 56% during the same period, as demand for durable goods remained low, and PP prices from Asia were more competitive than those of exports from the U.S. Gulf Coast. Nevertheless, ExxonMobil’s new 450,000 tons per year polypropylene plant in Baton Rouge, Louisiana, came online in December 2022. A market source said, “U.S. propylene prices reached their lowest level in December 2022.” The first quarter of 2023 will remain stable or show a slight increase; the second quarter is expected to see an increase, the third quarter will remain stable, and the fourth quarter will experience a slight increase. ” Enterprise Product Partners is building a 750,000 tons per year propane dehydrogenation facility in Texas, with plans to bring it online in the second quarter of 2023. This will bring the United States’ propane dehydrogenation capacity to 3 million tons per year.