Lead: This week, the domestic propylene oxide (PO) market was weak and consolidating early in the week, with the negotiation center moving lower. It then quickly strengthened, driven by feedstocks, and prices rose consecutively. As of September 11, the mainstream cash ex-works price in Shandong was 11,600–11,700 yuan/mt, up a cumulative 1,765 yuan/mt, or 17.86%, from the intra-week low, setting a new high for the second half of the year. Although the feedstock rally has slowed, the tight supply-demand balance has taken over as the main driver, and the market still has expectations of further gains in the short term.
Table: Domestic Propylene Oxide Weekly Supply Comparison
| Indicator | Current Period | Previous Period | Change |
|---|---|---|---|
| Output (10,000 tons) | 11.74 | 11.51 | 0.23 |
| Capacity utilization rate | 62.66% | 61.47% | 1.19 pp |
On the supply side, although a few domestic propylene oxide units have adjusted their operating rates recently, no significant incremental supply has materialized. Weekly output was 117,400 mt, only a narrow increase of 2,300 mt from the previous week, while capacity utilization rose by 1.19 percentage points. In addition, as some plants increased captive consumption, actual merchant volume was basically flat. In-production plants continued to operate with relatively low inventories; after the feedstock rally, inventories quickly fell further to low levels. With limited shipments, some sales were concluded at a premium, gradually pushing prices higher.
At present, all regions are in a tight balance, providing strong support to market prices. East China in particular still needs some inflows from northern China. Looking ahead, Satellite Chemical is restarting units one after another and is expected to release a small volume from the weekend to next week; Qixiang Tengda’s restart progress remains undetermined and warrants attention. In the short term, supply and demand in the market will still have a bullish effect.
On the demand side, market participants had earlier been watching for incremental PO supply. Coupled with follow-up purchases at both month-end and month-start, some downstream buyers had begun reducing volumes and waiting since last weekend. However, widespread bearish sentiment left feedstock inventories low. As prices rebounded and rallied rapidly this week, downstream orders, although softening recently, were largely maintained at a normal procurement pace to ensure production, leaving buyers relatively passive.
Looking ahead, after prices rise further, downstream pass-through may be somewhat constrained. In addition, volatility in crude oil and other markets is affecting sentiment, and some downstream volume cuts are possible, which could curb the market’s upward momentum.
The main feedstock propylene market, supported by supply conditions and crude oil, rose strongly. As of September 11, the mainstream price in Shandong reached 10,025 yuan/mt, up 985 yuan/mt, or 10.90%, from 9,040 yuan/mt at the beginning of the week. The strong propylene rally remained the initial trigger for this round of PO gains. As of today, propylene producers’ inventories are at low levels, and continued gains in international crude oil provide strong cost support, still underpinning the market. However, downstream cost pressure is notable, the overall buying pace has slowed, and the rally has clearly narrowed or is showing signs of stabilizing. Costs are expected to consolidate at high levels for now.
In the short term, propylene prices may consolidate, reducing the degree of support for PO prices, but they are still expected to run at relatively high levels. Liquid chlorine has risen moderately. Attention should be paid to subsequent crude oil volatility and propylene adjustments.
In the short term, propylene oxide prices have already surged to a new high for the second half of the year. Quotations have been relatively chaotic over the past two days. After cost support cools, participants are watching crude oil and feedstock futures with some caution about chasing highs. Although slightly tight supply and demand still provide bullish support, the rally may gradually narrow as the market waits for downstream digestion.
Going forward, the market is expected to continue rising moderately before easing back. Key focus will be on the realization of incremental supply and cost fluctuations. Prices are likely to remain high and volatile for the full month.
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