SunSirs: Propylene Prices Surged 38% in a Single Month, with Geopolitical Risks Being a Key Driver

I. Overview of Core Data

Since March, propylene prices have experienced a one-sided upward trend. As of March 10, the benchmark price of propylene from SunSirs was 8,817.67 RMB/ton, a significant increase of 37.54% compared to 6,411.00 RMB/ton at the beginning of March. Prices have shown a straight upward trend, with tight spot supply and high-priced transactions becoming the norm. Downstream demand was mainly driven by immediate needs.

II. The core logic behind the rise in propylene prices in March (driven by both Middle East geopolitics and domestic supply and demand)

1. Geopolitical risks in the Middle East:

As a core global producer of crude oil and propane and an important exporter of chemical products, the Middle East was experiencing a continued escalation of geopolitical conflicts, which had become a key external driver of the surge in propylene prices.

On the one hand, international crude oil and propane prices had risen sharply due to geopolitical tensions. As a core product in refining and propane dehydrogenation, propylene's raw material costs hadrisen rigidly, providing underlying support for price increases.

On the other hand, shipping risks in key waterways such as the Red Sea and the Strait of Hormuz had intensified, the expected arrival of imported propylene had tightened, transportation costs increased, and supply disruptions at chemical plants in the Middle East exacerbated market concerns about a supply gap, leading to a significant increase in propylene prices due to risk premiums.

2. Supply side:

Domestic propylene plant maintenance shutdowns were concentrated, with some plants operating at reduced capacity, significantly reducing the effective supply in the market and highlighting a tight spot market. With imports constrained, this contraction in domestic supply had further exacerbated the supply-demand imbalance, becoming the core internal support for the rapid price surge.

3. Demand side:

Downstream industries such as polypropylene and propylene oxide maintained normal operations, providing solid support for essential demand. Downstream enterprises passively accepted high-priced goods. Coupled with strong market expectations for price increases, essential demand and moderate restocking created sustained buying power, pushing prices higher. As of March 10, the benchmark price of PP (fiber grade) on SunSirs was 9,126.67 RMB/ton, an increase of 36.97% compared to the beginning of the month (6,663.33 RMB/ton).

As of March 10, the benchmark price of propylene oxide on the business information platform was 10,516.67 RMB/ton, an increase of 31.46% compared with the beginning of the month (8,000.00 RMB/ton).

III. Market Outlook

In the short term, geopolitical risks in the Middle East remain uncertain, and cost support from crude oil and propane has not disappeared. The tight supply of propylene in China is unlikely to ease in the short term, and downstream demand continues to follow suit. Propylene prices are likely to remain high, with increased volatility at high levels.

Key factors to watch include the evolving situation in the Middle East, the arrival of imported propylene, and the restart progress of domestic plants. If geopolitical tensions ease and supply recovers, there is a risk of a price correction from its current high levels.

IV. Summary

The 38% surge in propylene prices in March was a result of cost and import disruptions caused by geopolitical risks in the Middle East, coupled with domestic supply contraction and downstream demand. The market exhibited a strong trend driven by costs and supply-demand mismatch. The subsequent geopolitical situation and the progress of supply recovery will dominate price trends.

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