China's PDH sector struggles with expensive feedstock, poor PP margins

At least one Chinese propane dehydrogenation, or PDH, plant is suspending operations as the sector struggles with processing losses amid escalating

LPG feedstock costs, while others continue with propane imports to keep production going, trade sources said.

Tianjin Bohai Chemical shut its 600,000 mt/year PDH plant in North China March 23 due to poor PP margins and high LPG feedstock prices, a company

source told S&P Global Commodity Insights.

This came weeks after the company restarted its PDH unit Jan. 29 and operated at 90% of capacity in February following regular maintenance that started

Jan. 3, according to domestic information provider JLC.

"Now margins are not good," one trader said.

A JLC analyst said Tianjin Bohai shut for maintenance March 23 for around 15 days due mainly to negative processing margins caused by higher propane costs

and lower domestic PP prices.

Tianjin Bohai plans to restart its PDH unit April 7, a company source said March 28. "We shut down on March 23, weak PP margins downstream and firm feedstocks are some of the main factors," the company source added.

Tianjin Bohai Chemical produces about 1,700 mt/day of propylene and supplies mainly to buyers in North China and the Shandong region.

The company supplies 1,300 mt/day to its own downstream oxo alcohols operations, Tianjin Bohua Yongli, besides providing about 400 mt/day to term

customers.

Tianjin Bohua Yongli has two 250,000-mt/year swing plants that produce normal butyl alcohol, or 2-ethyl hexanol, and are currently operational.

Fujian Meide, a wholly owned subsidiary of China Flexible Packing Group, is due to restart its 660,000 mt/year propane dehydrogenation plant late March after

a scheduled shutdown at the start of the month, though the precise restart date is not yet known.

Others still importing

Others such as Jinneng Science & Technology Co. have bought by tender two 46,000-mt propane cargoes for May 1-15, or May 1-25, delivery CFR Qingdao,

at May FEI plus mid $30s/mt, trade sources said. This is ahead of its scheduled resumption of operations in mid May after maintenance activities began at its 1.08 million-mt/year PDH plant in eastern Shandong province from late March.

Another PDH operator Zhejiang Satellite, which operates a 900,000-mt/year PDH plant, is seeking by tender closing March 30 about 23,000 mt of propane for delivery over April 26-May 10 ex-ship at Jiaxing, trade sources said.

CFR North Asia propane hit $1,029.5/mt March. 7, the highest since reaching $1.040/mt Feb. 20, 2013, data from S&P Global showed.

CFR North Asia propane averaged $940.24/mt over March 1-25, up from $824.53/mt in February, the data also showed.

Overall, China's PDH plants operated at an average rate of 80% in February, up from about 69% in January, due to the return of four plants from maintenance, according to S&P Global's calculations based on data from domestic information provider JLC.

The price spread between polypropylene and propylene was calculated at $10/mt March 25, up from $5/mt the month before, much lower than the typical breakeven spread of $150/mt, data from S&P Global showed.

Asia's petrochemical sector is also reeling from rising costs of other feedstocks, forcing steam crackers to cut operating rates and switch to alternative feedstock to cope with more than a decade-high naphtha costs exacerbated by volatile crude prices amid the Russia-Ukraine conflict.

Regional naphtha-fed steam crackers had started lowering runs since late 2021 to manage poor margins, with some operators cutting rates to 70% in March as the turmoil took its toll, and the extended strain led to production line cuts further downstream, market sources said.