The domestic propylene market continued to rise during the period, supported by high production costs and downstream restocking at lower price levels. As of October 26, the average mainstream propylene price in Shandong stood at RMB 11,000/ton, up 4.12% from October 19.

Looking ahead, supply-side changes are expected to develop gradually, while persistently high feedstock costs continue to squeeze downstream profit margins. As a result, downstream buyers are becoming increasingly reluctant to accept elevated propylene prices. With tightening supply expectations competing against weak demand, the market is entering a more intense standoff between bullish and bearish forces. Propylene prices are therefore expected to fluctuate within a limited range in the short term.

1. Supply: Slight Decline in Regional Output Provides Price Support

Shandong's propylene production remained relatively stable this week. The newly added 70,000-ton/year catalytic cracking unit at Qicheng Petrochemical entered maintenance, contributing to a slight decline in regional supply.

On October 26, daily propylene output in Shandong reached approximately 30,100 tons, down 100 tons from October 19. The regional capacity utilization rate fell from 62.7% to 62.5%. Although daily output at Zibo Junchen recovered somewhat, the increase was offset by the shutdown and production cuts at Qicheng Petrochemical.

Looking ahead, Jineng Chemical's PDH unit is expected to shut down for maintenance, while Bohua Chemical is also planning to suspend operations at its PDH unit. Meanwhile, Zhenhua Petroleum is expected to restart its PDH unit. These changes may partially offset one another, keeping overall supply relatively tight.

At the regional level, reduced supply following Jineng Chemical's maintenance shutdown may support prices in coastal Shandong. In contrast, the restart of Zhenhua Petroleum's unit could increase supply in Dongying. Potential external sales by integrated producers may also put downward pressure on local prices.

2. Demand: High Costs and Plant Maintenance Weigh on Procurement

During the period, propane prices fluctuated downward while propylene prices rebounded, improving PDH production economics by RMB 536/ton compared with October 19.

However, high propylene prices continued to weigh on downstream profitability. Acrylonitrile losses widened by RMB 777/ton, while PP powder losses increased by RMB 285/ton. Propylene oxide profitability also weakened slightly, with losses increasing by RMB 21/ton.

Meanwhile, operating changes across downstream plants in Shandong became more pronounced. Several PP, propylene oxide, and phenol-acetone units underwent maintenance shutdowns, affecting theoretical propylene demand by approximately 3,800 tons.

Looking ahead, downstream operating rates are expected to remain uneven. Qingdao Haiwan's phenol-acetone unit is expected to restart, potentially increasing propylene demand. Jineng Chemical also plans to restart its second PP production line while shutting down another line, leaving its overall operating load relatively stable.

In Dongying, Shandong Jinling's propylene oxide unit is scheduled to restart, while Keluer's acrylonitrile unit is expected to shut down one production line. These changes may offset each other to some extent. In addition, maintenance at several other PP and PO units is likely to limit overall demand recovery, reducing the potential for further propylene price increases.

3. Price Spread: Narrow Margins Continue to Limit Buying Interest

The recent rebound in propylene prices has narrowed the price spread between propylene and PP powder. As of October 26, the spread stood at only RMB 200/ton, putting considerable pressure on PP powder producers' profit margins.

With profitability under pressure, PP-related producers have limited incentives to increase raw material purchases aggressively. This weak procurement interest could constrain further gains in the propylene market.

Looking ahead, a potential correction in propylene prices may help restore the price spread. However, any recovery in downstream purchasing will depend on the magnitude of the propylene price decline and the resilience of the PP powder market. If margins improve, PP powder producers may gradually increase procurement. Otherwise, demand-side support will likely remain limited.

Market participants should also monitor the possibility of integrated producers selling additional propylene into the spot market, which could increase local supply pressure.

4. Market Outlook: Short-Term Correction Risks Remain

Overall, the expected reduction in upstream supply has yet to fully materialize, while high feedstock costs continue to squeeze downstream margins. The resulting weakness in purchasing enthusiasm is limiting downstream acceptance of elevated propylene prices.

As bullish supply-side factors and bearish demand-side pressures offset one another, the Shandong propylene market is likely to experience increased price volatility, with a possible short-term correction.

The mainstream propylene price in Shandong is expected to fluctuate within a range of RMB 10,500–11,000/ton in the near term.

In the medium to long term, market participants should closely monitor maintenance at Jineng Chemical and Bohua Chemical, as well as the restart progress of Zhenhua Petroleum. Changes in upstream operating rates will play a key role in reshaping regional supply-demand dynamics and determining the next direction of propylene prices.