China’s PDH Run Rates Up Amid Plant Restarts, Improved Margins: Sources

China’s propane dehydrogenation unit operating rates are recovering as plants restart after maintenance and profit margins improve, China-based sources said.

Average operating rates across the country are estimated at around 65%-68% in June, up from 60% in May, according to analysts. Rates plunged to around 55% in April as several units were taken offline amid propane feedstock shortages linked to the Middle East conflict, OPIS reported earlier.

Sources noted that the June recovery is approaching pre-war levels, when operating rates were around 70%.

The increase in run rates has been largely driven by multiple plants returning from maintenance in June, with four restarts heard, including Hebei Haiwei (500,000 metric tons per year), Tianjin Bohai (600,000 mt/year), Ningbo Kingfa (600,000 mt/year) and Zhejiang Huahong (450,000 mt/year).

The restarts coincide with improving margins, with June PDH economics projected to be around breakeven levels after previously being in the red. “Downstream propylene prices remain supported, while Far East LPG prices have softened, especially after news of a potential U.S.-Iran peace deal first emerged,” an analyst said.

The prompt-month July Far East propane swap opened at $737/mt on Thursday, down from a month earlier when the prompt-month swap was at $762/mt.

Operators have also returned to the spot market in preparation for restarts and higher operating rates, with OPIS tracking three buy tenders from Chinese PDH producers this week.

Some market participants noted that despite the recent uptick in demand from Chinese PDH operators, buyers have not significantly increased purchases of U.S. cargoes, which remain a key alternative supply source for Asian importers since the Middle East conflict. U.S. cargoes are still subject to a 10% tariff for Chinese buyers, prompting some to diversify into alternative origins.

Canadian cargoes have emerged as one such alternative, with most being full propane cargoes that are well-suited for PDH usage. Vortexa data showed flows to China rose 57% month-on-month in March following the start of the conflict in late February, increasing from 184,800 mt in February to 289,400 mt in March. June volumes are estimated at 155,000 mt.

West African cargoes have followed a similar trend, rising 77% month on month from 93,300 mt in February to 165,600 mt in March. June volumes are estimated at 46,600 mt.

Some analysts said that if restarted units continue to ramp up gradually, PDH operating rates could return to pre-war levels of around 70% in July.

—Reporting by Cheryl Lee, clee@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com