Despite a larger supply recovery from near-capacity operating rates and weakened downstream demand in Q4 2024, U.S. Gulf Coast propylene market fundamentals in early 2025 have been indicative of more seasonal volatility.

Propane dehydrogenation (PDH) unit operations over the past five years have recovered after the second quarter of 2025 after inclement first-quarter winter weather and subsequent maintenance activity have cleared, largely fluctuating propylene prices in the process, according to data from PetroChem Wire (PCW) by OPIS, a Dow Jones company.

The shift to ethane-based feedstock over the past 10-15 years due to better natural gas liquid extraction technology has meant less byproduct propylene production from steam cracker units, thus, polymer-grade propylene (PGP) values can be sensitive to changes in production rates for the four Texas-based PDH units, as well as upstream pressure from propane-feedstock costs. Propylene prices are also influenced by downstream demand, especially polypropylene demand, which accounts for roughly half of all propylene consumption. Polypropylene has many rigid plastic applications including storage containers, automotive components and food packaging.

Since PCW started tracking operating data in late 2018, daily PDH run rates have only fallen below 50% utilization about 6% of the time which resulted in extreme PGP price swings well above 70cts/lb. However, since mid-2023, rates have averaged about 80%, where PGP values only oscillated between 30cts/lb and 60cts/lb.

In early 2021, winter storm Uri effectively shut in most olefins production in the Gulf Coast region, pushing Mont-Belvieu Enterprise (MtB-EPC) PGP benchmark values to over $1/lb. Price spikes also followed winter storm Landon in February 2022, winter storm Mara in February 2023 and winter storm Heather in January 2024, withPGP prices jumping roughly 50%, 155% and 42%, respectively, from the prior year’s December levels.

Maintenance activity would shortly follow these weather-related events as part of the PDH operators’ plans to enhance asset reliability, which became more relevant after Enterprise Products Partners’ startup of its second PDH unit in Mont Belvieu, Texas, in 2023, effectively adding 25% to U.S. PDH capacity.

Upstream propane values also provide additional pressure as feedstock availability tightens amid rising heating and power generation demand in the winter months. Propane supplied in the U.S. market typically peaks at around December or January and then sharply declines into the remainder of the first quarter.

Meanwhile, refinery grade propylene (RGP) economics continue to adjust to production shifts as well, mainly tied to U.S. PADD 3 refinery utilization rates.

RGP is an intermediary chemical that can go into the production of octane fuel enhancers, adhesives, paint thinners and plastic fibers. RGP molecules can also be split into higher purity propylene grades, including PGP, at a handful U.S. Gulf Coast facilities.

The post-pandemic slump in fuel and end-use plastics demand has kept RGP values contained despite a handful of refineries going offline since 2020. Severe weather and maintenance halts to production, similar to PDH outages, are common, though RGP prices have quickly recovered from supply disruptions in recent years.

Winter storm Uri knocked off close to 60% of U.S. Gulf Coast refining capacity within a few week’s time, which pressured MtB-EPC pipeline-delivered RGP to rise above the 40cts/lb mark in 2021, though values quickly plummeted to around 15cts/lb shortly thereafter as run rates returned to healthier levels. Subsequent winter storms created short-term price hikes to around 25-30cts/lb in early 2022 and 2023, but were quickly stemmed to below 15cts/lb as rates rebounded.

Sluggish downstream demand through early 2024 did little to move RGP prices until Hurricane Beryl moved through southeast Texas refining infrastructure in July, at which time values jumped again, surpassing 20cts/lb by October.

The RGP market is expected to experience mixed operational factors in early 2025. A hefty schedule of fluid catalytic cracker (FCC) unit turnarounds at PADD 3 refineries in Q1 2025 has already pushed regional utilization rates to as low as 79% reported in January, according to Energy Information Administration (EIA) data, down from the typical 95% level for refineries in the region.

Simultaneously, LyondellBasell’s Houston, Texas, refinery is in the process of shutting down completely sometime in Q1 2025, the company had previously announced during 2024 earnings presentations, and has been operating at 35% run rates during the quarter. The facility has the capacity to produce about 191,000 metric tons of RGP, or about 3% of refinery-based volumes in the United States, per data from Chemical Market Analytics (CMA), by OPIS.

As a result, MtB-EPC pipeline RGP values have sharply rebounded to over 30cts/lb the week ending Feb. 21, according to PCW data.

The North American market is also anticipating the startup of Formosa Plastics’ Point Comfort, Texas, 250,000 mt/year polypropylene (PP) unit to come online sometime in 2025, which will provide additional propylene. This comes at a time when North American PP operating rates have steadied around the 70-80%% range in recent months.

One major production trend on the horizon will be the significant additions to global PP capacities in the coming years. CMA data estimates year-over-year increases of roughly 4.2%, 7.8% and 6.6% in 2025, 2026 and 2027, respectively, with Northeast Asia making up most of the expansion.

Demand for PP in these growth areas, however, might not keep up as global, post-pandemic trends have veered lower from traditional consumption levels, which, in turn, could stifle global propylene demand once these projected-surplus capacities come online.

Global trading considerations have also arisen, largely in light of the second Trump Administration’s dictate to raise tariffs on historically strategic trading partners, though current trade volumes suggest this also might not be a significant impact.

Per U.S. Census data, U.S. propylene imports have arrived predominately from Canada, though volumes have dropped off considerably within the past decade, with just over 240,000 metric tons coming to the U.S. in 2016 to just under 65,000 mt in 2024.

Canada has also benefited from bolstered polypropylene production, mainly from Heartland Polymers’ 525,000 mt/year propane-to-PP integrated facility in Alberta, Canada, which went online in early 2023.

In export markets, the U.S. mainly sends propylene to Colombia and Mexico, with annual volumes peaking to 326,000 mt and 338,000 mt, respectively, over the past decade, while receding to 169,000 mt and 209,000 mt in 2024. Mexico intends to enforce retaliatory tariffs in early March, which could disincentivize cargos further.

As PDH unit reliability improves as countries rely less on US propylene and derivative exports, propylene market fundamentals could become increasingly tied to seasonal operational changes moving forward.