FocusChina C3 supply shrinks as Shandong refineries cut output

01 June 2012 08:28  [Source: ICIS news]

By Lilian Hua

SINGAPORE (ICIS)--China’s propylene (C3) supply is being constrained by a spate of shutdowns and production cuts at refineries based in Shandong province since the second half of May, industry sources said on Friday.

Shandong in eastern China has the most active propylene trading market in the country, but the daily traded volume of the chemical in this market has declined to 1,930 tonnes since late last month, down by 21% from a month ago, market sources said.

Because of the limited domestic supply, propylene offers in China were rising. On Friday, offers stood at CNY9,900-10,000/tonne ($1,554-1,570/tonne), up by CNY100/tonne from Thursday, market sources said.

But the price gains maybe capped by weak downstream demand, especially in the polypropylene (PP) and propylene oxide (PO) sectors, they said.

Small refiners in China are either cutting production or shutting their fluid catalytic cracking (FCC) and deep catalytic cracking (DCC) units in anticipation of a further reduction in the prices of gasoline and diesel by the government and because of weak demand.

China’s National Development and Reform Commission (NDRC) is expected to announce a yuan (CNY) 400-600/tonne cut in fuel prices on 8 June, market sources said.

In May, wholesale prices of finished oil products have fallen by more than CNY500/tonne, analyst from ICIS C1 said.

Among the refiners planning to shut production at their FCCs is Shandong Huaxing Petrochemical. The company intends to shut its FCC units on 2 June, thereby halving its monthly propylene output to 3,500 tonnes.

Tianhong New Energy, meanwhile, has issued steep cuts in propylene production at its deep catalytic cracker (DCC) unit early this week. The unit is currently producing 20 tonnes/day of propylene from 150 tonnes/day, previously.

Meanwhile, Qingdao Anbang refinery has put off the restart of its FCC to early June from late May, because of the weak demand for gasoline and diesel. The unit usually produces around 80 tonnes/day of propylene.

($1 = CNY6.37)

By: Lilian Hua

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