Taking Pressure from Supply Shift, The US and Mexico Propylene Prices Surge in December

In the second week of December 2023, the U.S. Propylene market experienced a significant price surge of 8.5%, driven by pivotal shifts in commercial crude oil inventories, a crucial feedstock for Propylene production. The latest U.S. Energy Information Administration (EIA) weekly petroleum status report revealed a notable 4.3-million-barrel decrease in inventories, excluding the Strategic Petroleum Reserve (SPR), between December 1 and December 8. This decline directly influenced Propylene prices, reaching the week-ending December 15. U.S. crude oil stocks, excluding the SPR, declined to 440.8 million barrels on December 8, down from 445.0 million barrels on December 1, significantly lower than the December 9, 2022, figure of 424.1 million barrels. SPR crude oil remained steady at 351.9 million barrels on both December 8 and December 1, compared to 382.3 million barrels on December 9, 2022. The broader U.S. petroleum market experienced a 10.0-million-barrel week-on-week decrease and a 2.2% downturn, with total petroleum stocks reported at 1.611 billion barrels on December 8.

Meanwhile, in the Mexican market, Propylene prices observed an 8.4% increase, influenced by expensive Propylene imports from overseas, particularly the USA, where prices rose by 8.5%. Despite this, the Propylene Refinery Grade price remained stable at USD 281 per metric ton.

In a recent strategic move, Bharat Petroleum Corp. Ltd. (BPCL) has unveiled plans to enhance its petrochemical production capabilities with the addition of a new unit at the operator’s 15.5-million tonne/year Kochi refinery in Ambalamugal, Ernakulam district, Kerala, India. The project, valued at 50.44 billion rupees (USD 607.10 million), received approval from BPCL’s board on December 19 and involves the establishment of a grassroots Polypropylene unit from Propylene boasting a production capacity of 400,000 tpy. This significant development was disclosed through regulatory filings to BSE Ltd. and the National Stock Exchange of India Ltd. Projected to be completed within a timeframe of 46 months, the expansion aligns with BPCL's strategic initiative to meet the burgeoning demand for Propylene in India.

Leveraging readily available supplies of Propylene feedstock for Polypropylene production, the proposed unit underscores BPCL's commitment to addressing the robust and growing market demand for these essential materials. The decision to progress with the installation of the Polypropylene production unit follows BPCL's thorough environmental impact assessment of the proposed project, conducted in March 2023, as outlined in the company's 2022-23 annual report to investors. This forward-thinking expansion marks a significant step in BPCL's continuous efforts to strengthen its position in the dynamic petrochemical market including Propylene and contribute to the fulfilment of India's increasing requirements in this critical sector.