The recent sharp drop in crude oil costs and the start-up of new cracking units will stimulate the growth of propylene production in the United States in 2019, although export and unplanned shutdowns may cause some volatility in the market. Market participants believe that overall, in 2019, the U.S. propylene market will be in a balance between excess and excess.

For most of 2018, tight supply of propylene in the United States led to higher prices. At the beginning of last year, propylene prices in the United States rose sharply due to the unplanned shutdown of some propane dehydrogenation (PDH) plants. In the second half of the year, the price of propylene continued to rise in the US market due to the failure of some PDH units and the reduction of propylene production in cracking units.

Another reason for the decline in propylene production in the U.S. pyrolysis plant is that the production of propylene by-products is limited by the increase in the amount of ethane used in the pyrolysis plant. With the new cracking plant in the United States put into operation in March and July 2018, the supply of ethylene in the United States increased substantially, resulting in a sharp drop in ethylene prices. Low ethylene prices have squeezed the profit margins of American cracking plants, prompting them to use more ethane, which is the most economical raw material for ethylene production. At the same time, strong crude oil prices support the prices of heavier raw materials such as naphtha, propane and butane, which makes cracking heavier raw materials more uneconomical.

Although the production of PDH units in the United States may continue to be unstable in 2019, propylene production from cracking units will rebound at the end of 2018, and this trend is likely to continue until 2019.

At the end of 2018, the price of crude oil fell and the profit margin of cracking unit increased, which improved the economy of heavy cracking raw materials. Crude oil prices are not expected to rise substantially in 2019, which may maintain the economic feasibility of heavy cracking raw materials. Increased use of heavy pyrolysis feedstocks will stimulate the increase of propylene production in pyrolysis units.

In 2019, U.S. refineries will maintain a high start-up rate, so propylene production from refineries is expected to be guaranteed. On the one hand, demand for U.S. fuel exports, especially for Mexico, will remain strong. On the other hand, due to the gradual approaching of the new International Maritime Organization (IMO) regulations on sulfur content of ship fuel in 2020, ship owners need to switch to low sulfur content fuels, so diesel demand is expected to increase.

With the increase of propylene production from cracking plants and refineries in 2019, the unplanned shutdown of PDH plants has brought less pressure on propylene prices than in 2018.

After the off-season of demand at the end of 2018, propylene demand is expected to rebound in early 2019, as downstream producers need to rebuild propylene inventories at the beginning of each year. The recent fall in propylene prices may stimulate downstream producers to increase plant start-up rates and bring upward pressure on the propylene market.