Core Viewpoint - The propane dehydrogenation (PDH) industry is facing significant losses, with profits dropping to around -1400 yuan/ton, marking the lowest level in nearly six years. There are expectations of widespread shutdowns in the PDH industry this month, raising concerns about the impact on downstream products like propylene, polypropylene (PP), and liquefied petroleum gas (LPG) [1][2]. Industry Profit Trends - The PDH industry's profit trajectory showed a clear "rise and fall" pattern last year, peaking in July and August due to low raw material prices and a rebound in downstream PP prices. However, since mid-October, profits have been in decline, leading to significant losses [1]. - The main reason for the continued losses is the weakening price of PP, with supply outpacing demand as PP production capacity is expected to grow by 12% in 2025 and around 10% in 2026, while actual demand growth is only projected at 4%-5% [1][2]. Raw Material Pressure - The pressure on raw materials is increasing, with seasonal purchasing expectations in India and Japan driving up import propane prices. Domestic deep processing enterprises report high spot prices for propane, further squeezing PDH industry profit margins. Additionally, the current demand for PP is weak, limiting price recovery potential [2]. Impact on Related Products LPG - LPG demand is relatively stable, but its price is influenced by the PDH industry's demand. Since November, LPG's fundamentals have shown a "strong reality, weak expectation" pattern. If PDH operations reduce or shut down, LPG's price stability may be compromised [4]. - Long-term projections indicate that LPG production capacity in the U.S. and the Middle East will continue to increase, leading to potential downward pressure on LPG prices if PDH operations decline [4]. PP - As the core downstream product of PDH, PP prices have been declining for three consecutive months since September. While expectations of reduced PDH operations may provide short-term support for PP prices, high inventory levels and upcoming new production capacity in 2026 will likely maintain long-term supply pressure [5]. Propylene - Propylene, being a direct downstream product of PDH, will see a significant supply reduction if PDH operations shut down, potentially providing price support. However, the ongoing pressure on PP margins and reduced operating rates may limit propylene's price increase potential [6]. Trading Opportunities - Market participants should focus on the actual shutdown situation of PDH units in January. If the number of shutdowns increases, it could significantly support PP and propylene prices. Conversely, if shutdowns are fewer than expected, related products may face downward pressure [8]. - Long-term variables to monitor include domestic macro policy releases and the impact of new production capacity planned for 2026, which could affect the supply-demand balance for PP and propylene [8].

Report Information - Report Title: "Profit Rebalancing under Rhythm Game - Outlook for LPG & Propylene Futures Market in 2026" [1] - Report Date: December 18, 2025 - Analysts: Chen Xinchao (Investment Consulting Qualification No.: Z0020238), Zhao Shucen (Contact Person, Futures Practitioner Qualification No.: F03147780) 1. Report Industry Investment Rating - Not provided in the report 2. Core Viewpoints of the Report - The operating logic of the C3 industrial chain is expected to shift from unilateral compression in 2025 to profit repair under range - bound fluctuations in 2026. The propane price center is likely to remain relatively low, providing weak cost - side support for the C3 industrial chain. Meanwhile, with the slowdown of propylene capacity expansion and the continued drive from downstream sectors, the supply - demand outlook for propylene is expected to improve marginally, but attention should be paid to the actual implementation of new plant construction under the low - profit background. The opportunities in the industrial chain mainly lie in periodic repairs rather than a trend reversal [2]. 3. Summary by Directory 3.1. 2025 LPG, Propylene Trend Review 3.1.1 2025 LPG Market Review - The LPG market in 2025 can be divided into four stages: In the first quarter, the domestic civil gas market was in a seasonal peak. The spot price of the lowest deliverable product in the domestic market was around 4,800 - 4,900 CNY/ton, and the market fluctuated widely with costs. From April to May, affected by tariff policies, the external market price of crude oil and FEI market prices plummeted, and then rebounded. The domestic market was weak due to high inventory and low demand. From June to September, with the shift of the import trade center to the Middle East, the supply was stable, but the demand was weak, and the market was under pressure. In the fourth quarter, the CP price dropped, PDH profit was briefly repaired, and the chemical demand increased. The supply - demand situation improved, but the long - term supply was still loose [8][9]. 3.1.2 2025 Propylene Market Review - The propylene market in 2025 also had three stages: In the first quarter, new capacity led to an oversupply situation, and the price declined. From June to August, due to the shutdown of main production plants and maintenance of multiple devices, the supply tightened, and the price rebounded, but the sustainability was limited due to weak downstream demand. In the fourth quarter, the downstream profit was compressed, demand weakened, and the price dropped to a five - year low [11][13][14]. 3.2. 2026 LPG Operating Logic 3.2.1 Supply Side - In 2025, China's LPG imports remained stable, but the import structure changed significantly. After the adjustment of Sino - US tariff policies in April, the import from the Middle East increased, while that from the US decreased. In 2026, the Middle East's LPG supply has an expected increase, with the main increment concentrated in the second half of the year. The US production growth is expected to slow down, but the export capacity will improve [15][18][34]. 3.2.2 Demand Side - The growth of PDH capacity will further slow down in 2026, and the profit is expected to be repaired. The average operating rate of PDH is expected to increase, driving an additional propane demand of about 2 million tons. The demand for imported propane from domestic cracking plants is expected to remain weak. The propane demand in Japan and South Korea is expected to remain stable, and the growth rate of India's propane demand is expected to slow down, while Southeast Asia's demand may continue to be supported by the operation of existing cracking plants [41][44][52]. 3.2.3 LPG Summary - The supply - demand pattern of propane in 2026 shows a characteristic of "tight at the beginning and loose later, gradually becoming looser". In the first quarter, the supply is relatively tight, but better than in the fourth quarter of 2025. In the second quarter, the market is in a transition period. In the second half of the year, with the release of new capacity in the Middle East, the supply - demand pattern will become looser [57]. 3.3. 2026 Propylene Operating Logic 3.3.1 Supply Side - In 2025, the propylene supply expanded rapidly, and the over - supply situation intensified. In 2026, the growth rate of propylene capacity is expected to slow down to about 9%. The new capacity is mainly concentrated in the second half of the year, and most of the new capacity comes from integrated plants. The supply is still expected to be loose, and the focus will shift to the risks of structural and rhythm mismatches [59][67]. 3.3.2 Demand Side - In 2025, the demand for propylene from major downstream sectors increased by 15%. In 2026, the nominal demand growth rate is about 11%, mainly from polypropylene, propylene oxide, and butanol - octanol. However, due to the over - capacity in the downstream and compressed profits, the actual demand may be less than the nominal demand [69][75]. 3.3.3 Propylene Summary - In 2025, the propylene market in Shandong was generally in a state of over - supply, with a brief tightening in the middle of the year. In 2026, the upstream and downstream production schedules of propylene show a structural characteristic of "downstream first, more downstream production throughout the year". Nationally, the supply - demand gap is expected to narrow in the first half of the year, and the overall pattern will remain stable in the second half of the year. In Shandong, the supply - demand situation is expected to improve gradually, with a possible improvement in the second half of the year [87][89]. 3.4. Overall Summary - In 2025, the global propane supply was abundant, and the price decreased. The propylene market was in an over - supply situation, and the C3 industrial chain was under pressure. In 2026, the propane price is expected to stay low, and the supply - demand situation of propylene is expected to improve marginally. The operating logic of the C3 industrial chain is expected to shift from unilateral compression to profit repair under range - bound fluctuations [95][96].

Report Industry Investment Rating No relevant content provided. Core Viewpoints - The core contradictions affecting the LPG price trend include cost - end crude oil facing supply - surplus pressure and geopolitical disturbances, with prices oscillating between $63 - 65 this week and a slightly lower price center; the CP November contract price showing supply - side pressure; the US propane inventory at a historical high and demand being seasonally weak; and the domestic fundamental situation with a slight contraction in supply and relatively strong chemical demand [2][5]. - There are both negative and positive factors. Negative factors are the continuous losses in the domestic PDH sector and the shrinking Asian cracking profit which may reduce the demand for PG as a cracking substitute. Positive factors are the potential avoidance of a US government shutdown and the supply - decrease and demand - increase in the fundamentals this week, along with a rebound in civil gas prices [5]. Summaries by Catalog LPG Price Forecast - The monthly price range forecast for LPG is 4000 - 4500, with a current 20 - day rolling volatility of 15.77% and a 3 - year historical percentage of 9.53% [1]. LPG Hedging Strategy Inventory Management - When inventory is high and there are concerns about price drops, for a long - position in the spot market, it is recommended to short the PG2512 futures at 25% hedging ratio with an entry range of 4400 - 4500 to lock in profits and cover production costs, and sell the PG2512C4400 call option at 25% hedging ratio with an entry range of 60 - 70 to collect premiums and lock in the selling price if the spot price rises [1]. Procurement Management - When the procurement of regular inventory is low and procurement is based on orders, for a short - position in the spot market, it is recommended to buy the PG2512 futures at 25% hedging ratio around 4000 to lock in procurement costs, and sell the PG2512P4000 put option at 25% hedging ratio with an entry range of 50 - 70 to collect premiums and lock in the spot purchase price if the PG price drops [1]. Industry Data Summary - The data shows the prices, spreads, month - spreads, ratios, and profits of various LPG - related products on different dates from November 4 to November 11, 2025, including Brent, WTI, MOPJ, FEI, CP, etc., along with their daily and weekly changes [6].

Core View - The short - term geopolitical risks and inventory decline support a rebound, but the weak chemical demand and the global pattern of strong supply and weak demand remain unchanged. LPG is expected to remain weak in the medium - to - long term [3] - Port inventory decreased month - on - month, and the supply pressure was relieved in the short term [2] - Crude oil rebounded due to geopolitical risks, and the expected increase in Saudi CP drove up the cost of LPG [2] - The operating rate of PDH plants remained at a multi - year low, the polypropylene price fell below the 2023 low, and the profit loss of alkylation plants widened [2] - The propane inventory in the United States is at a historical high, the export volume from the Middle East has increased significantly, and the unexpected decline in Saudi CP reflects the abundant supply [2]

Report Industry Investment Rating - Not provided in the given content Core Viewpoints - The core contradictions affecting the LPG price trend include cost - end crude oil fluctuations due to supply surplus and geopolitical issues, an unexpected decline in the CP October contract price, the recurrence of Sino - US contradictions, and a loose domestic market with stable supply - demand and weak combustion demand [2] - Bullish factors include a small rebound in the crude oil market, the expansion of PDH profits supporting demand, and the widening FN spread attracting cracking demand [3] - Bearish factors are the persistent supply surplus of crude oil in the fourth quarter and the weak performance of both the outer - market propane and domestic spot [2] Summary by Related Catalogs LPG Price and Volatility - The monthly price range prediction for LPG is 3800 - 4200, with a current 20 - day rolling volatility of 21.39% and a 3 - year historical percentage of 37.37% [1] LPG Hedging Strategies Inventory Management - For high inventory and fear of price drops, sell PG2511 futures at a 25% hedging ratio in the 4400 - 4500 range to lock in profits and sell PG2511C4400 call options at a 25% ratio in the 60 - 70 range to reduce costs [1] Procurement Management - For low procurement inventory, buy PG2511 futures at a 25% hedging ratio in the 3800 - 4000 range to lock in procurement costs and sell PG2511P3800 put options at a 25% ratio in the 50 - 70 range to reduce costs [1] Industry Data Price - Brent crude was at $63.39 on October 13, 2025, up $1.3 from the previous day and down $2.76 from the week - ago level. WTI was at $59.14, up $1.3 and down $2.88 respectively [5] - LPG's main contract closed at 4082 yuan/ton on October 13, 2025, up 12 yuan from the previous day and down 155 yuan from the week - ago level [5] Spread - FEI - MOPJ M1 was - 86.30 on October 13, 2025, down 19.43 from the previous day and 14.67 from the week - ago level [5] - LPG - FEI was 49.85, up 150.25 from the previous day and 198.37 from the week - ago level [5] Monthly Spread - LPG11 - 12 was 107 on October 13, 2025, up 29 from the previous day and the week - ago level [5] - FEI M1 - M2 was - 13.63, down 0.38 from the previous day and up 0.63 from the week - ago level [5] Ratio - MB/WTI was 0.44 on October 13, 2025, down 0.03 from the previous day and up 0.01 from the week - ago level [5] - FEI/Brent was 0.60, down 0.03 from the previous day and 0.02 from the week - ago level [5] Disk Profit - The disk import profit - FEI was - 400.55 on October 13, 2025, up 14.53 from the previous day and down 152.04 from the week - ago level [5] - The PDH disk profit - PG was 278.7, down 42.8 from the previous day and up 19.25 from the week - ago level [5] Spot Profit - The Asian naphtha cracking profit was - 32.4996 on October 13, 2025, up 7.99 from the previous day and 17.54 from the week - ago level [5] - The Asian propane cracking profit was 47.0266, up 30.56 from the previous day and 53.52 from the week - ago level [5] Freight - The freight from the Middle East to the Far East was 62.667 on October 13, 2025, down 1 from the previous day and 7.5 from the week - ago level [5] - The freight from the US to Europe was 67.5, down 1.5 from the previous day and 11.625 from the week - ago level [5]