SunSirs: Propane: Maintenance Winds Down, Supply Recovers; Demand Diverges Amidst High-Level Volatility

Last week, the domestic propane market continued its trend of high-level consolidation and regional divergence. Shandong—a major production hub—demonstrated relative strength, while arrivals of imported cargo remained scarce. Domestic supply saw a modest uptick as facilities previously undergoing maintenance gradually resumed production. Downstream Propane Dehydrogenation (PDH) plant operating rates increased, though overall profitability remained weak; meanwhile, demand for combustion purposes entered its seasonal off-peak period. The market is currently balancing cost-side support against weakening demand, exhibiting a structural trend where demand from the chemical sector remains relatively strong, while demand from the residential sector remains relatively weak.

I. Export Data: Stable Volume and Price in Q1; Robust Overseas Demand

According to customs data, China’s exports of propane and related products totaled 32,100 tons during the January–March period of 2026. This represents an 11.85% year-on-year increase compared to the 28,700 tons exported during the same period in 2025. Export value rose by 9.3% year-on-year, while the average export price remained stable. In March alone, exports reached 11,200 tons—a month-on-month increase of 28.7% and a year-on-year increase of 13.2%. Major destinations included Southeast Asia, Japan, and South Korea; sustained overseas essential demand provided resilience to export volumes, resulting in an overall stable performance.

II. Weekly Capacity and Supply: Maintenance Concludes, Operating Rates Rebound, Supply Sees Modest Increase

Domestic propane refinery units have entered the final stages of scheduled maintenance, with previously idled facilities gradually resuming operations. This week, the industry-wide operating rate rebounded from previous lows to a range of 62%–65%, resulting in a modest month-on-month increase in domestic propane supply. The recovery in supply was most pronounced in the Shandong region, where several refineries resumed normal shipments, thereby increasing the circulation volume of domestically produced resources. Arrivals of imported propane vessels remained relatively low, keeping port inventories at moderate levels. Overall supply is characterized by a pattern of recovering domestic output alongside tight import availability, leading to a gradual and moderate easing of supply-side pressure.

III. Spot Prices and Market Fluctuations (May 15)

Today, domestic spot propane prices experienced narrow fluctuations at high levels. The Shandong market edged slightly higher, while markets in South China and East China remained stable with a slight downward bias; trading activity was driven primarily by essential, immediate-use demand. 

Mainstream Quotes: Shandong domestic propane: 6,180–6,280 RMB/ton; East China imported gas: 6,250–6,350 RMB/ton; South China: 6,100–6,200 RMB/ton.

Fluctuation Characteristics: After opening slightly higher in the morning session, the market underwent a period of volatile consolidation. Demand from the chemical sector provided support for higher prices in certain regions, while weak demand from the residential sector dampened overall gains, resulting in a narrowing of price fluctuations.

IV. Inventory and Domestic Market Situation: Port Inventories Stable; Social Inventories Low

Inventories at major domestic propane ports remained largely unchanged month-on-month, sitting at the median level observed over the same period in the last three years; consequently, there is currently no significant pressure from inventory accumulation. Downstream enterprises generally maintain low raw material inventories—typically holding just 7–10 days' worth of stock to meet immediate operational needs—and primarily adopt a "buy-as-needed" procurement strategy. Overall social inventories remain at a low level, providing a certain degree of support for spot market prices. The domestic market currently exhibits an operational pattern characterized by recovering supply, diverging demand, and healthy inventory levels.

V. Upstream/Downstream Pricing and Demand Landscape

Upstream: International crude oil prices continue to fluctuate at high levels, keeping the landed cost of imported propane elevated and providing strong cost-side support for domestic prices. Downstream: Demand has shown clear divergence; operating rates at PDH (Propane Dehydrogenation) plants are gradually increasing, signaling a recovery in demand for propane in the chemical sector, which supports the pricing of high-value supplies. Conversely, demand for residential fuel enters its off-season as temperatures rise; consequently, purchasing activity has weakened, leading to relatively softer pricing in this segment. Overall, the upstream and downstream sectors present a market landscape characterized by cost-side price floors, resilient demand, and resistance to further price hikes.

VI. Future Market Outlook

Steady recovery in supply + High-level cost support + Diverging demand = Propane prices are expected to continue fluctuating at high levels.

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