Propylene demand likely to rebound amid improving macro-economic environment, says GlobalData

The COVID-19 pandemic has created economic disruption leading to downfall in demand for petrochemical products, including propylene and its derivatives. Companies have responded either by lowering operating rates or closing production units, in response to a low-demand environment. They should consider a wider range of scenarios and factors such as pace of global economic recovery and propylene market conditions that are likely to aid decision-making in the near future, says GlobalData, a leading data and analytics company.

John Paul Somavarapu, Oil and Gas Analyst at GlobalData, comments: “The COVID-19 outbreak and a decline in oil prices have forced companies to announce project delays. Projects under initial phases of development foresee postponement, as companies are likely to re-evaluate investment strategies. Supply chain disruptions and labor shortages have affected the under-construction/commissioning projects. Companies should work closely with contractors and suppliers to develop a revised project timeline.”

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Propylene capacity additions are largely concentrated in Asia, majorly from China, which is targeting self-sufficiency to meet its existing and growing propylene demand. China is followed by India, Iran and the US, capitalizing on growing demand and leveraging feedstock advantage.

Somavarapu concludes: “Propylene is among the largest produced petrochemicals and has seen steady growth over the years. It is expected to grow at a healthy 2.6% compound annual growth rate (CAGR) over the decade. Companies will need to undertake a disciplined approach to deploy capital, including postponement or slowing down of selected growth projects and altering shutdowns. Companies are expected to remain optimistic on fundamentals of propylene industry over the medium-long term and are likely to pursue ongoing/new investment opportunities accordingly, for their competitiveness and growth.”

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