Propylene Price Change: An Opportunity For Integrated Refiners

Propylene (C₃H₆) is a colorless gaseous hydrocarbon, an important petrochemical feedstock used in the production of a variety of chemicals and products, including solvents, plastics, fertilizers, paints, and other synthetic materials. The chemical industry relies heavily on propylene for many of its products. It is used in the production of polypropylene, which is a strong, lightweight plastic that is commonly used for packaging, and for making molded parts such as car bumpers. Propylene is also a key component in the production of acrylics and specialty polymer resins, which are used in paints, coatings, and adhesives.

Demand And Supply

The demand for natural gas decreased in the US and Europe as the weather improved and these regions shifted away from using natural gas and towards using coal as an energy source. This shift was made in order to reduce dependence on Russian natural gas. The decrease in demand and supply of natural gas led to a decline in its prices. However, despite the drop in natural gas prices, the price of propylene in Korea remained stable. This stability was despite the fact that propylene production from naphtha was not profitable due to a decrease in the price difference between naphtha and propylene. (Decreased spread between Naphtha/Propylene from 280$ to 155$).

FOB Korea Propylene prices were traded at 860$ on 2 January 2023 and slightly moved up to 865$ as of 25 January 2022.

Shift In Feedstock

The low natural gas prices, however, presented an opportunity for integrated refiners. These refineries could make a profit by converting liquefied petroleum gas (LPG) into propylene. This shift in feedstock could change the way propylene is produced in Asia. In other words, there could be a move towards using LPG as the feedstock instead of naphtha. This is because the conversion of LPG to propylene is more profitable in the current market conditions with low natural gas prices.

Insight

This shift in this feedstock demand and the lower prices could have a significant impact on the polymers and chemical industry. A change in the market conditions could lead to changes in the types of chemicals or polymers being produced and the cost of production. Additionally, the shift towards using LPG as a feedstock in propylene production could also lead to lower costs in various chemical and polymers production as propylene acts as feedstock for a major chunk of products in the industry.

Read more: Naphtha Price Change Impacts The Chemical Industry