Cost pressures and supply-demand dynamics drive high-level volatility and a downward trend in the cyclopropane market.

Introduction: Since November, the domestic propylene oxide (PO) market has continued to operate within a relatively high range, but the overall trend has shown a volatile downward movement. During this period, the market adjusted amid cost pressures and supply-demand dynamics. As of November 11, the mainstream transaction price in the Shandong market was quoted at 11,050 yuan/ton (ex-works, cash), a cumulative drop of 1,150 yuan/ton from the month's opening price of 12,200 yuan/ton, representing a decline of 9.43%. The market currently shows signs of slight stabilization, but without clear positive support, price resilience may be limited.

Supply: Concentrated adjustments in Northern China; levels remain near annual highs

Data Source: Chempricehub

On the supply side, as of November 11, the domestic daily production of PO increased to 18,100 tons, with a capacity utilization rate of 67.63%. This represents a narrow decrease of 0.25 percentage points compared to the beginning of the month, though it remains at a relatively high level for the year. The commodity volume remained stable at approximately 10,600 tons/day. Key fluctuations during the month included narrow reductions in operating loads by Hangjin, Tianhua, Binhua, Qixiang, and Lihuayi, while Xinyue increased its load. Jinling and Yida restarted their units. These adjustments were concentrated in Northern China plants, and after offsetting effects, the overall impact was limited.

Looking ahead, next week Hangjin and Sanyue are expected to moderately increase their operating loads. Xinyue is anticipated to increase internal consumption, leading to a reduction in commodity volume. Guoen plans to restart operations. Zhejiang Petrochemical will enter its annual maintenance shutdown for both PO and polyether units simultaneously; however, this primarily affects the polyether market. For PO, commodity volume fluctuations are expected to remain small after offsetting effects, suggesting a slightly loose supply situation. Attention should be paid to whether temporary production cuts occur due to cost pressures.

Demand: Cautious follow-through, poor transmission; sustainability of rigid demand release may be limited

From the demand perspective, facing the rapid frequency of price fluctuations in the PO market, downstream sectors have adopted a cautious approach. Driven by the "buy on rise, wait on fall" sentiment, most buyers are waiting for clear upward signals before making rigid demand purchases. Overall purchasing rhythm is scattered, following market trends with high frequency but low volumes. Additionally, with PO prices running in a relatively high range during the month, feedback from various downstream industries indicates poor transmission to end-users, suppressing overall buying appetite. This often creates a chain reaction in the industry: upstream price hikes → cost pressure → PO adjustment → downstream transmission issues → end-user resistance → downstream volume reduction → weakening PO market.

Looking forward, once the Shandong market reaches the 11,000–11,100 yuan/ton (ex-works, cash) level, downstream observers perceive low market risk and may appropriately release rigid demand to take advantage of stabilization points for moderate shipments. However, the sustainability of this action may be limited. In mid-November, Wudi Dexin and Shenghong polyether units are expected to restart, while Zhejiang Petrochemical undergoes maintenance. Specific performance depends on actual execution.

Cost: PO-propylene spread remains at low levels; potential for moderate widening

The primary raw material, propylene, surged in November before falling back. As of November 11, the reference price in Shandong was 10,450 yuan/ton, a decrease of 11.06% from the month's opening price of 11,750 yuan/ton. The fading geopolitical premium and declining crude oil prices weakened cost support. Increased spot circulation in Northern China, combined with widespread losses among downstream users and a focus on rigid demand purchases, led to weak trading sentiment and a continuous downward shift in the price center. However, the average PO-propylene spread in November was only 171.36 yuan/ton, with periods of inverted margins occurring, indicating relatively strong cost support. Liquid chlorine also fluctuated at relatively high positive values. Representative processes continued to operate at a loss. The theoretical profit for the chlorohydrin process stood at -1,056.6 yuan/ton, while the HPPO process theoretical profit was -1,389 yuan/ton.

Looking ahead, propylene is expected to remain weak in the short term, allowing the PO-propylene spread to widen moderately. However, the significant drop in propylene prices poses certain negative sentiment factors for the market. Although cost pressures across multiple processes have eased somewhat, they remain in loss-making territory. Attention should be paid to the impact of crude oil volatility on all parties.

Outlook: Short-term stabilization and consolidation; firmness requires positive catalysts

In the short term, the market has stabilized and consolidated at current price levels. Operating plants have seen reduced pressure due to improved shipments over the past two days. However, without significant fluctuations or positive catalysts in supply-demand fundamentals or costs, prices lack sufficient support. After end-users complete replenishment, the market may revert to a weaker trend. Nevertheless, given the limited room provided by cost support, PO prices are tentatively expected to adjust narrowly between 10,800 and 11,200 yuan/ton. Significant adjustments in crude oil or propylene prices, or supply-side shutdowns, could potentially support a market rebound.