Cost and Supply-Demand Resonance Drives Short-Term Strength in Allyl Chloride

Lead: Entering late August, driven by reduced supply from temporary shutdowns at some local units, domestic allyl chloride prices rebounded after a decline. As of August 24, the price of allyl chloride in Shandong was 8,300 yuan/ton, up 1,000 yuan/ton from the previous working day, an increase of 13.7%.

This round of rapid price increases was driven by the dual logic of rising upstream raw material costs and tightening supply-demand fundamentals.

I. Cost side: stronger raw materials underpin the price floor

Since August, upstream raw materials propylene and liquid chlorine have maintained a relatively strong operating trend, raising the cost floor for allyl chloride production. As of August 24, the production cost of allyl chloride reached 8,481 yuan/ton, up 2.1% from August 17. The cost floor clearly moved upward, providing underlying support to product prices from the cost side.

II. Supply-demand fundamentals: shrinking supply combined with rigid demand supports the market

Supply side: slower-than-expected plant restarts and tight spot supply

Table 1: Comparison of daily allyl chloride output trends in Shandong (10,000 tons, %)

In late August, the restart of the maintenance unit at Zhonghai Fine progressed slower than expected, with the resumption of operations delayed. In addition, some units at Sanyue experienced temporary shutdowns, leading to a notable contraction in the flow of commercial allyl chloride supply in the domestic market. According to Chempricehub data, daily allyl chloride output in Shandong was 1,100 tons on August 17, falling to 1,000 tons on August 24, a decrease of 9.1%. The reduction in supply was the core driver of this round of price increases.

Demand side: core downstream operating at high loads, rigid-demand purchasing underpins the market

Table 2: Comparison of daily capacity utilization among major downstream groups in Shandong (%)

On the downstream side, epichlorohydrin, the main consumption area, maintained full-capacity operations in Shandong. Only Liancheng experienced a brief operating fluctuation due to a power plant fault, but production quickly resumed after the fault was resolved. Other downstream plants mainly procured on a rigid-demand basis. Although there was no large-scale centralized restocking, sustained purchasing provided a certain degree of demand support.

Overall outlook: At present, the combined support from raw material costs, tightening spot supply, and bullish market sentiment is driving multiple positive factors in concert, and allyl chloride prices are likely to remain firm in the short term. However, the contradiction is equally prominent: downstream buyers have limited tolerance for the high prices after the rapid rise, and their willingness to actively chase higher prices is weak, limiting the room for further upward breakthroughs. It is worth noting that the current spot price is slightly below the production cost. If prices remain inverted, companies may be forced to further adjust their sales pace.

Key points to watch going forward:

1. Restart progress of maintenance units at Zhonghai Fine, Sanyue, and others.
2. Changes in operating rates at epichlorohydrin and other downstream units.
3. Cost fluctuations resulting from movements in upstream propylene and liquid chlorine raw material prices.

Top 5 representative allyl chloride enterprises by operating capacity: