Price Transmission of Propylene Value Chain: Interconnection between Related Petrochemicals

For the purpose of the price risk management, the price transmission process along the value chain of propylene, including naphtha, gas oil, gasoline, ethylene, polypropylene (PP), is explored using co-integration analysis technique. The analysis shows that there exist long-run equilibrium relationships between: (i) The prices of naphtha and propylene, in which naphtha is a leading factor of propylene's price; (ii) The prices of ethylene and propylene in North West Europe, where ethylene's price is a leading factor of propylene's price; and (iii) The prices of PP and propylene in South East Asia, where the price of PP is a leading factor of propylene's price, while in NW Europe, the price of propylene is a leading factor of PP's price.