On June 11, Wanhua Chemical announced that the 900,000 t/y PDH unit and the 600,000 t/y PO/CHP propylene oxide (PO) unit at its Penglai Industrial Park had completed maintenance and resumed normal operations. The shutdown, which began on April 26 and lasted approximately 46 days, has officially ended.
The PDH unit primarily produces propylene, while the PO/CHP unit manufactures propylene oxide. With both facilities restarting simultaneously, domestic PO supply is expected to increase significantly. For polyether polyol producers, this could help ease raw material cost pressure.
However, the extent of any cost reduction will ultimately depend on how far PO prices decline in the coming weeks.
As of this week, China's PDH operating rate has risen to 67.64%. With additional units returning to service, propylene supply is becoming more abundant, providing greater support for PO production costs.
The restart of Wanhua's 600,000 t/y PO unit will directly increase spot market availability. Although the company has not disclosed its exact operating rate recovery schedule, the improvement in supply fundamentals is already becoming evident.
Over the past week, the PO market has experienced significant volatility. Earlier, worsening losses among polyether producers and weaker purchasing activity pushed PO prices below RMB 9,000/ton, with some transactions reported near RMB 8,800/ton. Later, several PO producers reduced operating rates, while unexpected shutdowns at major units tightened supply and helped prices rebound to around RMB 9,100/ton.
From a supply-demand perspective, however, the recent price recovery has been driven primarily by temporary supply reductions rather than stronger demand. As Wanhua and other facilities resume operations, the supply gap created by earlier production cuts is expected to narrow. As a result, the market may have limited room for further substantial gains. Against the backdrop of the traditional demand off-season, PO prices currently lack strong support for a sustained upward trend, while resistance to high-priced transactions is increasing.
How Much Could Polyether Production Costs Fall?
If PO prices decline from RMB 9,100/ton to RMB 8,800/ton, and assuming PO accounts for approximately 70% of polyether production costs, the theoretical production cost of polyether polyols could decrease by roughly RMB 210/ton.
Therefore, Wanhua's restart alone is unlikely to immediately improve profitability across the polyether industry. However, if the additional supply continues to enter the market and drives PO prices back toward lower levels, raw material cost pressure on polyether producers could ease significantly.
Demand Remains the Key Variable
Even if cost pressure eases, the future performance of the polyether market will still depend largely on downstream demand.
At present, polyether polyol industry operating rates remain around 50%. Demand from downstream sectors such as flexible foam, furniture, automotive, and building insulation remains relatively weak, with purchasing activity largely limited to essential replenishment.
Without a meaningful recovery in demand, lower PO prices may not automatically translate into higher profits for polyether producers, as polyether product prices themselves could also come under downward pressure.
For polyether manufacturers, the more important indicator is the spread between polyether prices and PO prices. With Wanhua's unit back online, market conditions are gradually becoming more favorable for lower PO costs. If PO prices decline more sharply than polyether prices, industry profit margins could begin to recover.
