Asian propylene market has been softening since the second week of April due to a diffused cost pressure from feedstock naphtha prices. Propane’s discount to Naphtha has been widening since February owing to lowered carrier charges from the US and the Middle East, prompting refiners to shift towards cheaper propane as the preferred feedstock. Propane dehydrogenation (PDH) capacity in China has been gradually increasing year on year due to the relatively high volatility and unpredictability in the Naphtha Market.

Meanwhile, Chinese PDH plants had struggled throughout March to squeeze out even modest margins due to a surge in propane prices as the Chinese economy faced strict lockdowns and major container terminals faced severe clogging. Propane prices for Northeast Asia have shown a month-on-month increase of 14% from February to March. Arbitrage margins for propane trade vis-à-vis the US and the Middle East have not been forthcoming for the Chinese traders. Propylene prices in China have remained stable during the first two weeks of April due to a relaxation in the supplies of Naphtha and Propane.

Southeast Asian propylene’s discount to that of Northeast Asia has been widening in April due to relatively cheaper LPG and Naphtha in S.E Asia. Crude oil prices have sobered up this week signalling a further dip in naphtha prices before the end of the week. India too had witnessed a downtrend in the prices of propylene from the week ending 18^th of March. Most refineries and PDH plants in the Asia Pacific region are still running at run rates significantly lower than full capacity. Thus, supply tightness and disruption in imports of feedstock (Naphtha and Propane) may continue through May.

May prices of Propylene in the Asia Pacific region are expected to be in the range of USD 1050/Mt to USD 1150/Mt as ChemAnalyst predicts the crude oil prices for the month of May to be hovering between USD 87/Mt to USD 105/Mt during the same period. Feedstock supply tightness had already bottomed out by the first half of April as the OPEC had promised to increase their production rate of crude oil for the ongoing quarter and thus naphtha and propane supplies will improve in the month of May giving respite to refineries and PDH plants.