Lead: This week, China's propylene oxide (PO) market shifted from weak to strong under the dual support of higher costs and limited incremental supply. By September 3, the Shandong market price is expected to be up 8.02% from the start of the week, once again showing sustained gains and climbing back above the 10,000-yuan/ton level. In the short term, cost support remains significant, but after prices reach the high 10,000-yuan range, the market's focus of contention is likely to gradually shift to supply-demand fundamentals. From mid-month onward, supply increments are anticipated, and the subsequent trend is expected to progressively return to supply-demand logic.
Supply: Limited release of commercial volume; suppliers under no pressure, southern market tight
Table: Comparison of domestic PO supply data
| Item | Aug 26 | Sep 2 | Difference | Change |
|---|---|---|---|---|
| Daily output (10,000 tonnes) | 1.56 | 1.75 | 0.19 | 12.18% |
| Daily capacity utilization | 58.29% | 65.50% | 7.21 pct pts | / |
| Commercial volume (10,000 tonnes) | 0.81 | 0.89 | 0.08 | 9.88% |
From a supply perspective, domestic PO daily output first fell and then rose recently. Last week, Shida was off-line for column cleaning; around the weekend, Befar and Sanyue had short-term output fluctuations with reduced volumes; and Levima and Wanhua had not yet resumed. Daily output hovered around 15,000–16,000 tonnes. This week, chlorohydrin-process units largely returned to normal full-load operation, and Wanhua and Levima successively restarted, lifting daily output to 17,500 tonnes and raising capacity utilization by 7.21 percentage points. Market supply increased accordingly. In practice, however, the incremental supply materialized later than expected, and the actual increase in commercial volume was only 800 tonnes—less than half of the output increase. Since the restarted units are still in their initial running phase, they face no pressure, and the market remains in a tight-balance state.
The recent uptrend has also been strongly supported by suppliers' relatively pressure-free yet slightly tight position, particularly in the southern market where spot supply is strained and sales are running at premiums. Looking ahead, Qixiang Tengda's 300,000-tonne HPPO unit and Satellite Petrochemical's 400,000-tonne HPPO unit may restart around mid-month, though the exact timing is still undetermined. In the near term, from this week into next, no obvious volume release is expected. Levima may restart alongside its supporting downstream polyether line, so the near-term incremental supply is expected to mainly come from small additional volumes from Levima.
Demand: Continued wait-and-see amid low inventory; passive follow-ups awaiting price pass-through
On the demand side, the market ran relatively weak around last weekend. Participants watched both the expectation of Levima's restart this week and the possibility that demand could turn soft again after month-end rigid demand was fulfilled. They held cautious, wait-and-see attitudes and mostly followed up with reduced purchase volumes. This week, as supply increments were slow to materialize and costs stayed high, participants watched PO stage a strong rebound and reluctantly made purchases in succession. New orders picked up in the early week, but some feedback by mid-week suggested orders had slipped back, with weak follow-through from end-users.
Looking ahead, with prices returning to a relatively high level above 10,000 yuan/ton, downstream caution has clearly increased. Participants may slow the pace and wait for downstream price pass-through before making measured purchases. If end-users struggle to accept current prices, the industrial chain may curb the upward momentum from downstream to upstream.
Costs: Crude oil continues sharp fluctuations; propylene rally drives PO market
The primary feedstock propylene market rose strongly on supply and crude oil support. By September 2, the mainstream price in Shandong had reached 9,525 yuan/ton, a cumulative increase of 795 yuan/ton from 8,730 yuan/ton on Wednesday, August 26. The PO-propylene price spread narrowed further to 275 yuan/ton. The strong rally in propylene was a key trigger for this round of PO increases. As of September 2, the theoretical profit for the chlorohydrin process was -1,138.75 yuan/ton, down 21% from August 26—PO prices rose, but profits contracted.
In the short term, sharp crude oil adjustments have stirred market concerns. Propylene has been pushed up continuously and substantially, but the premium on actual transactions has weakened. As an important support for current PO prices, future fluctuations in crude oil and propylene are expected to have a major impact on PO's price direction. Meanwhile, attention should be paid to the realization of incremental supply under high-cost conditions.
Outlook: Costs support the market in the near term; supply-demand logic returns further out
In the short term, PO prices have returned to a relatively high position above 10,000 yuan/ton. Cost and supply support remain adequate for now, but with demand increasingly fearful of high prices, if no notable end-user follow-through emerges, the upside momentum may be moderately restrained.
Before mid-September, incremental supply is likely to be limited, and cost fluctuations may have a more visible impact. After mid-month, the focus will shift to the timing of incremental supply releases and the actual realization of peak-season demand. In the latter part of the month, the market is likely to gradually return to supply-demand logic as the dominant driver, with prices trending down modestly within a narrow range for consolidation.
Chempricehub Insights sincerely invites industry peers to gather in Ningbo, Zhejiang on September 8, 2026, for in-depth discussions on upstream and downstream restructuring and breakthrough strategies in the propylene oxide industry chain, focusing on hot industry topics, hearing authoritative expert interpretations, and witnessing the release of the latest industry data.
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