Propionic Acid Prices Surge in China Amid Global Supply Disruptions and Demand Boost

Shanghai (China): In February 2024, the price of Propionic Acid experienced a notable upswing in China's domestic market, marking a departure from its previous downward trajectory. This surge was primarily linked to heightened feedstock ethylene costs stemming from widespread plant shutdowns globally. Additionally, robust global crude oil prices, propelled by geopolitical tensions and a record surge in crude oil imports by China, contributed significantly to this price escalation. The WTI and Brent benchmarks reached their peak levels in over two months, exerting further pressure on Propionic Acid production costs. Moreover, improved downstream demand from the food industry, a key consumer of Propionic Acid, acted as an additional catalyst in driving up the Propionic Acid price. Together, these multifaceted factors culminated in the notable price hike witnessed in February.

The demand for Propionic Acid experienced a notable uptick in China as the downstream food industry showed signs of improvement during the Lunar New Year festivities. China's consumer prices saw an upswing, rising for the first time in six months, primarily attributed to spending associated with the Lunar New Year celebrations. This boost in consumer sentiment led to increased demand for various foodstuffs, contributing to the heightened demand for Propionic Acid, a key preservative widely used in the food industry. The year-on-year growth in consumer prices, the highest in 11 months, reflected gains in essential items, further highlighting the significance of Propionic Acid in food preservation. Despite ongoing concerns about the overall economic recovery, particularly in terms of weak domestic demand and declining producer prices, the positive momentum witnessed during the Lunar New Year period provided a favorable environment for Propionic Acid suppliers, resulting in an increase in its price.

Moreover, multiple feedstock ethylene plants globally, including major players like Sinopec - Kuwait Petroleum Corporation, Sinopec Guangzhou Petrochemical, Liaocheng Meiwu New Materials, and Sinopec Maoming Petrochemical in China and LyondellBasell, Royal Dutch Shell, and Chevron Phillips, underwent shutdowns worldwide, including in the US. These shutdowns, prompted by factors such as freezing weather conditions and other operational reasons, disrupted the supply chain of feedstock ethylene, leading to scarcity in the region. As a result, feedstock prices soared, consequently increasing the production cost of Propionic Acid, and driving its prices upward. Furthermore, manufacturing activities remained active in February, indicating high trading activities and improved demand, with the assessed price reaching USD 659/MT FOB Shanghai in February 2024, marking a 3.1% rise from the previous month.

In conclusion, while the Lunar New Year festivities contributed to a temporary surge in demand for Propionic Acid, the analysis indicates a potential downturn in the coming month. As the Lunar New Year celebrations have concluded, the heightened consumer spending associated with the holiday period is expected to subside. Consequently, the demand for Propionic Acid in the food industry may experience a decline, leading to downward pressure on its price.