Global Propylene Market Faces Volatility Amidst Oscillating Demand

The global Propylene market experienced dynamic shifts in pricing and demand trends across major regions, reflecting a complex interplay of domestic and international factors.

In the US market, the price of Propylene encountered a significant dip of approximately 5.7% during the week ending on November 1, 2023. This downward trajectory was primarily attributed to a downturn in domestic demand, particularly from downstream Polypropylene industries, driven by the off-season winter demand. Additionally, the export of Propylene faced formidable challenges, with low water levels at the crucial Panama Canal disrupting shipping routes. The resulting bottlenecks led to a surge in the cost of shipping fuels, especially diesel, reaching a nearly 16-month high. Ongoing disruptions at the Panama Canal, aggravated by an El Nino-fuelled drought, compelled shipping companies to make substantial payments for expedited passage or to navigate lengthy detours around South America. These disruptions also posed logistical challenges for empty vessels traversing from the Pacific to Atlantic markets, influencing daily freight rates and fuel shipping costs for the Propylene exports.

Propylene prices experienced a notable decline during the week in the European market. This decline was primarily linked to the global abundance of Propylene, fuelled by an increased supply of feedstock crude oil. Imports from the USA, Saudi Arabia, and Venezuela contributed to a surplus of raw materials, triggering a bearish trend in the European Propylene market. The surplus and subdued regional demand influenced by off-season winter patterns underscored the market's sensitivity to global and seasonal dynamics.

Contrastingly, the Asian Propylene market remained relatively stable throughout the week. The equilibrium in pricing was attributed to a balanced gap between demand and supply within the region. Notably, the closure of a 120,000 bpd refinery by Japanese refiner ENEOS and plans by Idemitsu Kosan to shutter a similar facility in March 2024 marked significant developments in the Asian refining landscape. These closures, accounting for 7% of Japan's refinery capacity, reflect long-term declines in the country's petroleum consumption driven by an aging population, economic slowdown, and heightened competition in petroleum exports across Asia. Japan's refineries, originally constructed to cater to domestic fuel needs, face challenges in competing globally due to their smaller size and lower complexity compared to newer facilities in countries like China, South Korea, and India.

In conclusion, the global Propylene market witnessed a week of intricate dynamics, with divergent trends across major regions. These shifts underscore the Propylene market's susceptibility to a multitude of factors, including seasonal demand variations, international shipping disruptions, and broader industry changes.