Propylene
S&P Global / ICIS
Once a refinery afterthought, propylene is now made on purpose in dedicated plants, mostly in China, mostly unprofitably.
Once a refinery afterthought, propylene is now made on purpose in dedicated plants, mostly in China, mostly unprofitably.
Top Producers
share of global capacity, 2025
Top Consumers
share of 2025 consumption
Main Uses
global propylene demand by derivative, 2024
Top Exporters
share of the small seaborne propylene trade, 2025; like ethylene, cross-border trade is a low single-digit share of production because most propylene is consumed where it is made
Top Importers
share of the small seaborne propylene trade, 2025, by destination
Can it be a contract?
7 of 8 tests passed
- Written grade spec: passes. A published specification a buyer will accept sight-unseen.Published grade specification
- Fungible: passes. Any lot of the grade substitutes for any other.Any lot substitutes for another
- Dispatchable: passes. Available at the cadence the buyer needs. Storage is only one route to that; generation and continuous flow are others, which is why power trades without being storable.Available on demand from stock or flow
- Delivery point: passes. A point the trade already uses can stand for the market. A contract cannot invent a delivery location; it has to adopt one the physical flows already run through. The clearest proof that a point qualifies is a liquid basis market against it: every other US gas hub quotes as a spread to Henry Hub, every ISO node settles against its hub, and grades quote as differentials to Brent. Where a point has no basis market quoting off it, it is not really the delivery point.US Gulf pipeline is the accepted delivery basis
- Observable spot price: partly. Somebody publishes or assesses a price the trade recognises.Assessed, with modest futures open interest
- Many on both sides: passes. Enough independent buyers and sellers that no one party sets the price.Many independent buyers and sellers
- Volatility worth hedging: passes. Prices move enough that someone needs to transfer the risk.Moves enough to need hedging
- Enforceable venue: passes. Contracts can be written and enforced where both sides trust the courts. This is separate from the delivery point and often decides it: Russia and Saudi Arabia sit on enormous, long-established physical flows and no forward settles in either, because the flow test passes and the law test does not.Enforceable in a trusted jurisdiction
Forward market: Yes
The best of the Western petrochemical contracts, and still thin against the physical market it hedges.
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Global demand
roughly 130 million tonnes
as of 2025
Share converted to polypropylene
roughly 67%
as of 2025
Chinese PDH capacity
more than 20 million tonnes/yr
as of 2025
US benchmark
PGP Mont Belvieu, US cents per pound
as of 2026
CME PGP contract size
100,000 pounds
as of 2026
Propylene is the second-largest olefin, a three-carbon molecule whose biggest job is becoming polypropylene, the plastic of car parts, food packaging, appliances, and medical equipment. Global demand is roughly 130 million tonnes a year. Historically propylene was a byproduct: refineries made it in fluid catalytic crackers as a side effect of gasoline production, and naphtha steam crackers made it as a co-product of ethylene. Nobody built a plant just to make propylene, because the byproduct streams were enough.
Shale broke that arrangement. As US and Middle East crackers shifted to ethane, which yields almost no propylene, the co-product supply stopped growing while polypropylene demand kept compounding. The answer was on-purpose production, dominated by propane dehydrogenation: a PDH plant strips two hydrogen atoms from propane to make propylene directly. China built the technology out at extraordinary scale, with PDH capacity exceeding 20 million tonnes a year by 2025, designed largely around imported US propane. The buildout overshot; Chinese PDH operating rates fell below 75 percent and margins spent much of 2024 and 2025 negative, yet plants kept running to hold market share and feed integrated polypropylene lines.
Pricing centers on polymer-grade propylene, PGP. In the US, PRA-assessed Mont Belvieu PGP sets monthly contract prices, and CME lists a cash-settled PGP futures contract against OPIS PetroChem Wire assessments that has become the most active petrochemical future in the West, though still small next to energy contracts. Asia trades CFR China cargoes assessed by S&P Global and ICIS, with PDH economics, the spread of propylene over propane, as the most watched margin in the complex.
How It Trades
| Venue | Physical contract and spot markets assessed by S&P Global, ICIS, and OPIS PetroChem Wire; CME futures for US PGP |
| Benchmark contract | CME Mont Belvieu Polymer Grade Propylene (OPIS PCW) futures, cash-settled; CFR China assessments anchor Asian trade |
| Contract size | CME PGP futures: 100,000 pounds per contract |
| Price terms | US cents per pound at Mont Belvieu; USD per tonne CFR China and FD Northwest Europe |
| Settlement | Futures settle financially on monthly average assessments; physical moves by pipeline on the Gulf Coast and by ship in Asia |
| Typical curve | Short and choppy; US PGP swings hard on single-unit outages because merchant supply is concentrated in few hands |
| Liquidity | Thin but the best in Western petrochemicals: the CME PGP contract has genuine commercial open interest; Asian trade is assessment-priced physical |
Where It Trades
approximate split of futures and OTC volume, 2025; most petrochemical volume trades OTC against price assessments
Supply and Demand
Top producers
- China (steam crackers, PDH plants, coal-to-olefins, refineries)
- United States (refinery FCC units, PDH, cracker co-product)
- Middle East, South Korea, Japan, Europe
On-purpose routes (PDH, metathesis, coal-to-olefins) now supply the marginal tonne; refinery byproduct supply tracks gasoline demand, which is flattening.
Top consumers
- Polypropylene plants worldwide, increasingly integrated with PDH in China
- US Gulf Coast derivative producers
- Northeast Asian chemical complexes
Major uses
- Polypropylene: roughly 67 percent
- Propylene oxide (foams, glycols): roughly 8 percent
- Acrylonitrile (fibers, ABS): roughly 6 percent
- Cumene for phenol, acrylic acid, oxo-alcohols: balance
What Moves the Price
- Propane price and the PDH spread, which set marginal production cost
- US refinery FCC run rates, tied to gasoline economics
- Chinese PDH capacity additions and operating-rate discipline
- Polypropylene demand from autos, packaging, and appliances
- Gulf Coast unit outages: US merchant PGP supply is concentrated, so single events move the price violently
- Ethane versus naphtha cracking economics, which determine co-product propylene volumes
- Freight and tariffs on the propane feeding Chinese PDH plants
Moments That Made the Market
2008
Propylene demand contracts with the financial crisis; prices fall with crude and gasoline
2010
PetroLogistics starts the first large US merchant PDH plant in Houston, opening the on-purpose era in the West
2013
China's first PDH plants start up, beginning a buildout that reaches more than 20 million tonnes a year of capacity by 2025
2015
US PGP prices decouple from refinery economics as on-purpose supply grows and ethane cracking shrinks co-product volumes
2021
Winter Storm Uri knocks out Gulf Coast propylene units in February; US spot PGP spikes to a record above one dollar per pound
2024
Chinese PDH margins spend most of the year negative as capacity outruns polypropylene demand; operating rates fall below 75 percent
2025
US-China tariff frictions intermittently disrupt the propane flow that Chinese PDH plants were designed around
What Changed Since the 2010 Era
- Propylene moved from byproduct to on-purpose product: PDH plants barely existed in 2010 and now set the marginal cost
- China went from large importer to near self-sufficiency in propylene, hollowing out the Asian import market Korea and Japan once served
- A listed, cleared US futures contract (CME PGP) replaced the swaps-by-appointment market of the 2000s
- The propane-propylene spread became one of the most watched margins in global chemicals, linking Mont Belvieu directly to Shandong
- Refinery propylene supply stopped growing as gasoline demand flattened, permanently changing the supply mix