Propylene oxide

Propylene Oxide Market Intelligence

I. Price Trends
1. Domestic Market:
- East China mainstream price: Recently fluctuating in the range of 9,200-9,500 RMB/ton, an increase of approximately 200 RMB/ton compared to the beginning of the month.
- North China mainstream price: 9,100-9,400 RMB/ton, with a price increase similar to that in East China.
- South China mainstream price: 9,300-9,600 RMB/ton, slightly higher than other regions due to regional supply and demand differences.

2. International Market:
- Southeast Asia FOB price: 1,350-1,400 USD/ton, an increase of approximately 50 USD/ton compared to last month, driven by global supply chain tensions and rising energy costs.
- Europe CIF price: 1,450-1,500 USD/ton, maintaining high levels due to elevated production costs resulting from the European energy crisis.

II. Supply and Demand Dynamics
1. Supply Side:
- Domestic capacity utilization: Approximately 75%, an increase of 3 percentage points from last month, with production volume rising due to the restart of some units.
- Import volume: October imports were approximately 25,000 tons, a 15% decrease month-on-month, mainly due to reduced supply from Southeast Asia and increased shipping costs.
- Inventory levels: Mainstream factory inventory is approximately 12,000 tons, at a historical low, supporting upward price pressure.

2. Demand Side:
- Downstream polyether polyols: Operating rates remain above 80%, providing stable demand for propylene oxide.
- Propylene glycol and dimethyl carbonate: Demand has increased by approximately 10% driven by the new energy industry, boosting propylene oxide consumption.
- Export demand: October exports were approximately 18,000 tons, a 20% increase month-on-month, primarily shipped to India and Southeast Asian markets.

III. Cost and Profit
1. Raw Material Prices:
- Propylene: East China mainstream price is 7,200-7,400 RMB/ton, an increase of approximately 300 RMB/ton from last month.
- Liquid chlorine: Prices remain stable at 100-200 RMB/ton with minimal fluctuation.
- Chlorohydrin process cost: Approximately 8,800-9,000 RMB/ton, with a profit margin of 300-500 RMB/ton.
- Co-oxidation process cost: Approximately 9,000-9,200 RMB/ton, with a narrower profit margin.

2. Profit Changes:
- Chlorohydrin process profit increased by approximately 15% month-on-month, while co-oxidation process profit remained flat. High-cost units have limited willingness to operate.

IV. Policy and Industry Developments
1. Environmental Policies:
- Some chlorohydrin process units in Shandong are subject to production limits due to environmental requirements, strengthening expectations of supply contraction.

2. Industry News:
- A major enterprise plans to add 200,000 tons/year of propylene oxide capacity, expected to be operational in 2024, which may alleviate long-term supply pressure.
- The European energy crisis persists, with some units reducing production, tightening the global supply landscape.

V. Analysis and Judgment
1. Short-term Drivers:
- Supply side: Domestic unit operating rates have increased, but reduced imports and low inventory levels support prices.
- Demand side: Downstream industry demand is stable, with export growth providing additional support.
- Cost side: Rising propylene prices have increased costs, compressing profit margins but not causing negative margins.

2. Medium-term Risks:
- Supply fluctuations due to environmental production limits; the intensity of policy enforcement needs to be monitored.
- If the European energy crisis eases, import volumes may increase, potentially pressuring domestic prices.

VI. Price Forecast
1. Short-term (1-2 weeks):
- Price range: 9,300-9,600 RMB/ton, expected to remain firm supported by cost push and low inventory.

2. Medium-term (1-3 months):
- Price range: 9,000-9,500 RMB/ton; prices may face pressure if new capacity is released or imports increase.

3. Long-term (6+ months):
- Price center: 8,800-9,300 RMB/ton, with the direction determined by the balance between supply increments and demand growth rates.

VII. Key Variables to Monitor
1. Propylene price trends.
2. Progress of the European energy crisis.
3. Intensity of domestic environmental policy enforcement.
4. Changes in downstream industry demand (e.g., in the new energy sector).