US Propylene Market Slumps Amidst Supply Glut During April 2024

The US Propylene market experienced a period of significant price decline during early April 2024, driven by a confluence of factors creating a surplus of the material. This surplus has put downward pressure on prices, leaving sellers struggling to find buyers despite offering lower costs. This price slump was attributed to a sluggish demand for polypropylene, a key downstream product of Propylene.  Manufacturing activity in industries that rely heavily on polypropylene appears to be subdued, leading to a lack of incentive for companies to purchase Propylene in the first place. This weak demand has resulted in a buildup of Propylene inventories, further exacerbating the downward pressure on prices.

Under the influence of a weak downstream demand, the market settled at USD 948/MT Propylene Polymer Grade DEL US Gulf, USA on 19th April 2024 with a drop of 14% when compared to the previous month. Even though sellers attempted to spark buying interest by offering lower prices throughout March, the response from the market remained muted. This indicates a significant disconnect between supply and demand. Buyers seem hesitant to take advantage of these deals, suggesting a lack of confidence in the near-term market outlook. Adding fuel to the fire of declining prices is a recent uptick in Propylene supply. During the first quarter of 2024, two out of four Propylene dehydrogenation (PDH) units in the US underwent planned maintenance. These units are responsible for converting propane into Propylene. With one unit already back in operation, the available Propylene in the market has increased, further tipping the scales towards a surplus. PDH unit may have caused a temporary disruption in production, but its overall impact on supply appears to be minimal. Additionally, propane, the primary feedstock used in Propylene production, has also seen a decline in utilization rates by PDH units. This decline, however, seems to be playing a secondary role in the current price drop. The current price decline in the US market comes on the heels of a period of improved global supply conditions. The resolution of the Red Sea crises and subsequent decrease in freight rates led to enhanced availability of raw materials and a more robust supply chain. This global trend appears to be contributing to the overall surplus of Propylene in the US market, making it even more difficult for domestic producers to find buyers.

As per ChemAnalyst, the future trajectory of US Propylene prices remains uncertain. Whether prices will stabilize or continue to decline will depend on several factors. A resurgence in downstream polypropylene demand is critical for absorbing the current surplus and pushing prices upwards. Additionally, any unplanned outages at PDH units could potentially tighten supply and offer some reprieve to sellers.