Chinese market players informed SSESSMENTS.COM that propane demand in the country increased in June as operators of propane dehydrogenation (PDH) plants ramped up their run rates. One of them said that China’s PDH runs reached approximately 90% with some running close to full capacity at this time. China’s PDH plants run at an average rate of 79% in May, higher than an average of 77% in the previous month but lower than 87% in May 2019. Higher run rates in June came on the back of robust PDH margins thanks to gains in the downstream propylene market and lower feedstock propane prices.
Propylene prices were resilient through the end of June supported by robust demand for derivative products such as polypropylene (PP), 2-ethyl hexanol, and normal butanol. Troubles at PDH plants operated by Zhejiang Sanyuan and Ningbo Kingfa in end-June also caused a supply tightness, but they have tried to ramp up production recently. A South Korean producer told SSESSMENTS.COM that spot propylene to China was limited because Lotte snapped spot material to feed its downstream plants as its cracker in Daesan remained under repair after an explosion in March.
However, the start-ups of new PDH plants are expected to cap further gains in Chinese propylene price. Recently ZPC started up a 600,000 tons/year PDH plant in Zhoushan. Market sources also informed SSESSMENTS.COM that Fujian Meide Petrochemical planned to start up its new 660,000 tons/year PDH plant in Jiangyin, Fujian province in Q3. Oriental Energy also aims to start up a new 660,000 tons/year PDH and two 400,000 tons/year PP units in Ningbo around the same quarter. These new PDH plants will add China’s propylene output by 1.92 million tons/year, with propane demand expected to rise by about 2.3 million tons.
China is still dependent on propane imports as most PDH units cannot feed on domestic feedstock due to quality issues, market participants told SSESSMENTS.COM. Hence, Chinese PDH operators fully imported propane from the Middle East and/or the US. Customs data showed China imported 629,822 tons of US propane in June, making the US China’s largest propane supplier that month. US propane inflow to China received a boost from tariff exemptions on US LPG.
In the downstream market, PP sales have been stable through June with domestic PP plants running at healthy rates of 85%-88%, according to market sources contacted by SSESSMENTS.COM. Chinese PP market continued to receive support from strong demand for medical applications, including face masks and protective suits. However, some traders were concerned about limited export orders, especially from the automotive and household sectors.
