The Global Propylene and Polypropylene Markets May Continue To Be Weak
2024-11-04
In light of ongoing overcapacity, weak demand, and challenging economic conditions, the outlook for the global propylene and polypropylene (PP) market in 2024 remains grim. Across Asia, Europe, and the Americas, these markets are struggling with excess supply, and high interest rates are limiting demand from downstream users of PP derivatives. Experts suggest that improvements in the global propylene and PP market are unlikely before the second half of 2024.
Insiders indicate that weakness in downstream markets, combined with the gradual ramp-up of new propane dehydrogenation (PDH) plants in China, could hinder the recovery of the Asian propylene value chain. With significant PDH capacity coming online in China, a recovery in Asian propylene prices is not anticipated in the first half of 2024. A South Korean producer expressed doubts, stating, “We do not expect any improvement in propylene prices in 2024, nor do we anticipate that many new PDH plants will be commissioned as planned. It will likely take at least another one to two years for the propylene market to show gradual improvement.” Additionally, planned maintenance in Asia is limited, with only two PDH plants in South Korea scheduled for shutdown in January, which is unlikely to provide significant market support.
The Asian PP market is also expected to remain weak in the first half of 2024 due to oversupply and sluggish demand. Although the Lunar New Year holiday might boost end-product production, concerns over cash flow and production costs will likely result in high inventories, especially with capacity expansions in China and high productivity rates in Southeast Asia. As price differentials narrow between South and Southeast Asia, it is anticipated that some Middle Eastern-origin PP cargoes may return to the Southeast Asian market due to subdued demand in India.
In Europe, the propylene market is expected to continue its weak trend into 2024, with a structural surplus persisting amidst a soft macroeconomic environment. The tight supply conditions seen in late 2023 are not expected to carry forward, as limited consumption in the derivatives market exacerbates oversupply issues. Market sources indicate that the prevailing oversupply and low consumption patterns are likely to persist until at least the second quarter of 2024.
Consumer frustration with the gap between spot and contract prices in 2023 is expected to drive changes in consumption trends, with an anticipated rise in spot transactions as buyers seek to reduce contractual commitments for greater supply security.
The European downstream PP industry is projected to face further pressure in the first half of 2024, as high interest rates continue to suppress end-user demand. Weak demand in sectors such as construction and consumer packaging is expected, and some capacity consolidation may occur in Europe this year. LyondellBasell has announced plans to shut down its copolymer PP production line in Brindisi, Italy, due to poor market conditions.
In the United States, PP manufacturers are still awaiting a recovery in global demand and a decrease in domestic polymer grade propylene (PGP) costs. Following a 20% increase in PGP prices from October to mid-November 2023 due to reduced supply, U.S. PP exports are currently unfeasible given the low profit margins and competitive pricing of Asian PP resin.
As some U.S. PDH units restart, there are expectations that restocking demand will pick up from January 2024. However, experts caution that these restarts alone are unlikely to spur sustained demand growth, with raw material prices being a critical factor. Meanwhile, several new PDH units in China are set to commence operations, impacting U.S. domestic propane exports.
The U.S. downstream PP market is also grappling with high interest rates, resulting in tighter consumer budgets and reduced spending on durable goods. Experts predict that inflation will continue to pressure holiday spending at the start of 2024. Consequently, many U.S. PP suppliers have shifted their focus to the domestic market, a trend expected to persist through the first half of the year.
Given the anticipated low propylene prices, our latex, epoxy, and metallic paints will benefit from access to affordable raw materials. Lianyungang Tuopu Technology is committed to producing high-quality coatings and paints at low costs, ensuring value for our customers.
