July 28 news
In July, the Chinese propylene oxide market showed a trend of first declining, then rising, and finally consolidating at a high level, but signs of softening at the high end appeared at the end of the month. At the beginning of the month, the price of propylene oxide hovered near the lowest point of the year (the reference price on July 1 was 7,800 CNY/ton); subsequently, due to multiple positive factors, the market began to rise strongly from July 9. By July 27, the spot price of propylene oxide had risen to 10,000 CNY/ton. However, by the end of the month, there were signs of softening at the high end. According to the monitoring system, as of July 28, the benchmark price of propylene oxide was 9,400.00 CNY/ton, an increase of 20.51% compared to the beginning of the month.
On the raw material front: In the first half of the month, the price of propylene—a key raw material—rose sharply. Against the backdrop of high propylene and energy prices, all production routes for propylene oxide have entered a loss-making zone. The inverted cost structure has left manufacturers with no room to offer price concessions, making it a general consensus in the industry to hold prices steady and support the market. In the second half of the month, as propylene prices began to decline, the cost support for propylene oxide weakened. However, at that time, many propylene oxide plants were undergoing large-scale maintenance shutdowns or reducing their output, resulting in a tight supply situation. This constrained supply environment enabled propylene oxide prices to demonstrate a certain degree of resilience against further declines; after a brief drop, prices soon rebounded and surged higher. According to monitoring systems, as of July 28, the benchmark price of propylene stood at 7,767.67 CNY per ton, up 4.81% from the beginning of the month (7,411.00 CNY per ton).
Supply side: In July, multiple propylene oxide plants in China were shut down or operating at reduced capacity, including the shutdown of plants such as Zhenhai Phase 2, Guoen, Yida, Qixiang, Ruiheng, and Lianhong, while others like Binhua and Sanyue maintained low production levels. The daily output of the industry was reduced to around 16,000 tons, with the capacity utilization rate dropping to 57.48%. The spot market supply was tight, with factories controlling the volume of external sales, leading to a continuous reduction in social inventory to a low level.
On the demand side: In early July, downstream sectors of propylene oxide showed a period of concentrated restocking, but overall demand remained somewhat weak. Taking polyether polyols—the main downstream product—as an example, July and August typically mark the traditional off-season for demand. Demand in downstream industries such as building insulation, soft furniture, and automotive interiors was generally subdued. In the building insulation sector, demand remained weak due to the impact of construction cycles; in the soft furniture sector, slower completion rates in the real estate market and hot weather conditions hindered sponge manufacturers' foaming operations, leading to a general decline in production activity; in the automotive interiors sector, some automakers implemented summer holidays due to high temperatures, further reducing demand. As for other downstream sectors, the propylene glycol market saw mostly rigid, steady demand with moderate trading activity; the capacity utilization rate of unsaturated resin plants remained at a relatively low level of around 34%, reflecting an overall stable yet slightly weak market trend. Overall, the operating rates of downstream sectors for propylene oxide remained low, with both polyether and unsaturated resin plants operating at depressed levels.
Comprehensive Forecast: According to propylene oxide analysts, geopolitics remains the biggest uncertainty in the short term. With cost support and a tight supply situation, prices are likely to rise easily but fall with difficulty. In the medium to long term, it is expected that new facilities with a combined capacity of 900,000 tons per year will gradually come on stream in the second half of the year. As a result, the market will once again be driven by supply-and-demand fundamentals, and price fluctuations are likely to narrow, with the overall trend remaining within a narrow trading range. Further attention should be paid to trends in propylene prices at the feedstock end, the operational status of production units, and the pace of new orders from downstream users.
