The Urethane Blog

Chinese Propylene Economics

Analysis: Chinese PDH plants’ processing losses expected to widen in Jan

Highlights

Processing losses widen on higher propane cost

Fujian Meide delays new PDH plant startup to H2 Feb

Three PDH plants shut for maintenance in Jan

Processing losses at China’s propane dehydrogenation plants are expected to widen in January due to higher feedstock propane prices, market sources said this week.

PDH plants in China are estimated to break even when the domestic propylene price is around Yuan 2,300/mt ($332.37/mt) higher than the import cost of propane, according to sources with PDH plants.

However, the steady rise in propane import cost and the decrease in domestic propylene prices in the past three months have eaten into PDH plants’ processing margins, and sent them into the red since December, S&P Global Platts reported earlier.

Chinese PDH plants were estimated to have reported a theoretical processing margin of minus Yuan 47/mt in December, the first time in the past three years, Platts calculation showed.

Asia LPG spot prices kept moving up in December due to tight supplies against healthy seasonal demand in the region. CFR North Asia propane hit a more than 12-month high of $627/mt on December 30, Platts reported.

On the other hand, ample domestic propylene supply amid lackluster market demand have been weighing on the price of the grade since October, sources said. The average domestic propylene price plunged to around Yuan 6,500/mt in December, compared with above Yuan 7,700/mt in September, according to data from domestic energy information provider JLC.

The PDH plants’ loss is estimated to deepen in January, due to higher January Saudi Aramco contract prices.Saudi Aramco set its January contract price for propane at $565/mt on an FOB basis, up $125/mt or 28% on the month. However, the average spot price for refrigerated propane cargoes delivered to East China edged down $2/mt on the month as of January 22, Platts calculation showed.

As a result, the average import cost for feedstock propane is estimated at around Yuan 4,668/mt in January, up Yuan 421/mt or 9.9% from the previous month, Platts calculations showed.

“Propylene price is expected to firm up slightly in January compared with the level in December with less supply due to more maintenance, but this would not change the processing loss situation for PDH plants due to much higher propane import cost this month,” a market source said.

The situation for PDH plants is not expected to improve until after the Chinese Lunar New Year holidays, the source said, adding that propane import cost is expected to fall in February.

Platts assessed H2 February CFR North Asia physical propane at $488/mt Wednesday, down $26/mt day on day, to a two-month low.

Meanwhile, the impending festive season is also set to impact the market.

Chinese Lunar New Year holidays fall on January 24-30 this year. Factories and market activities often resume gradually after the week-long holiday, or after the Lantern Festival which falls on February 8 this year, according to market sources.

PDH PLANT ACTIVITIES

Some Chinese PDH plants have planned to delay startup, extend maintenance or remain idle due to negative processing margins, market sources said.

China’s Fujian Meide Petrochemical, a wholly owned subsidiary of China Flexible Packing Group, plans to delay the startup of its newly built 660,000 mt/year PDH plant in Jiangyin, southeastern Fujian province, to the second half of February from the original first half of February, due to the high cost of feedstock propane, Platts reported earlier.

China’s Tianjin Bohai Chemical in northern China plans to extend its maintenance period by 10 days due to poor processing margin, according to a company source.

“We have decided to shut down the PDH plant for 40 days now due to high propane feedstock price,” the company source said. The company originally planned to shut its 600,000 mt/year PDH plant for 30 days maintenance starting from December 28, Platts reported earlier.

In addition, Hebei Haiwei in northern China also idled its 500,000 mt/year PDH plant for maintenance starting from December 31.

“It’s unknown when Hebei Haiwei will resume operation,” a market source said, adding that the plant has difficulty in purchasing propane feedstock now due to high price.

Hebei Haiwei was said to have no term contract with overseas suppliers, and mainly sources spot cargoes from its neighboring rivals Tianjin Bohai and Yantai Wanhua.

“Tianjin Bohai has cut its propane imports these two months due to high prices, which is believed to have resulted in limited propane supply to the local market,” the source added.

Moreover, Dongguan Juzhengyuan in southern Guangdong province has also shut its 600,000 mt/year PDH plant starting from January 6.

The PDH plant, which started operations in end-September, has not signed any term contract to secure propane feedstock as well. It bought 20,000 mt propane cargoes via tender for Jan 1-10 delivery, Platts reported earlier.

https://www.spglobal.com/platts/en/market-insights/latest-news/oil/012320-china-pdh-processing-losses