Propylene oxide

Recent Market Intelligence Report on Propylene Oxide (PO)

I. Price Trends
1. Recent Price Volatility:
- On July 6, 2026, the national mainstream market price of propylene oxide stood at RMB 7,717 per ton, down RMB 213 per ton (a decline of 2.69%) from the previous day.
- On July 8, 2026, the Business Network’s benchmark PO price was RMB 7,300.00 per ton, representing a 5.19% decrease from the benchmark price of RMB 7,700 per ton on July 1, 2026.
- From July 1 to July 6, 2026, prices exhibited a stepwise downward trend—from RMB 7,700 per ton to RMB 7,717 per ton—indicating that the July 6 figure reflects a statistical discrepancy in reporting methodology; the overall trend remained consistently downward.

2. Historical Price Comparison:
- In the first half of 2026, PO prices followed an inverted “V-shaped” trajectory: rising to RMB 8,600 per ton in January–February; surging to RMB 13,300 per ton in March–April due to geopolitical tensions; subsequently correcting sharply; and then gradually declining in May–June under fundamental supply-demand dynamics.
- The full-year 2025 average PO price was RMB 7,798 per ton, with an intra-year high of RMB 8,535 per ton (mid-November) and a low of RMB 7,175 per ton (late April).

II. Supply-Demand Fundamentals
1. Supply Side:
- Capacity Expansion: China’s domestic PO capacity is projected to reach 10.32 million tons/year in 2026, with a net increase of 1.36 million tons/year. New facilities include Zhenhai Refining & Chemical’s 400,000-ton/year PO/CHP plant and installations by Guangxi Huayi and others.
- Operating Rates: Capacity utilization fluctuated significantly in H1 2026—peaking at 604,000 tons/month in March (a historical high), then declining to 621,900 tons/month in June. In H2 2026, supply is expected to grow modestly by 0.75%, constrained by scheduled maintenance and cost pressures.
- Imports: Estimated imports for H1 2026 totaled 59,500 tons, down 6.89% year-on-year. Primary sources included Saudi Arabia, Thailand, and Singapore.

2. Demand Side:
- Consumption Volume: Total demand in H1 2026 reached approximately 3.3 million tons, up 14.98% year-on-year. Growth was concentrated in the polyether and propylene glycol sectors. Traditional peak demand (August–October) may see moderate recovery in H2, but overall demand remains relatively weak amid expectations of export contraction.
- Downstream Applications: Polyether polyols (65% share) and propylene glycol (18% share) are the two largest end-use segments. Emerging applications—including new-energy vehicles and building energy efficiency—are generating incremental demand.

III. Market Drivers
1. Geopolitical Conflict: The Middle East conflict in March–April 2026 pushed propylene feedstock prices upward, triggering a short-term 60% PO price surge to RMB 13,300 per ton. However, insufficient demand absorption led to a rapid correction.
2. Cost Volatility: Significant fluctuations in propylene—a key raw material—combined with internalization of green-energy costs (e.g., hydrogen and green electricity) have impacted marginal profitability.
3. Policy Impact: China’s “Dual Carbon” (carbon peak & carbon neutrality) goals are accelerating the phase-out of outdated capacity. Chlorohydrin-process PO plants’ share declined from 16.6% in 2025 to below 15% in 2026, with near-complete exit anticipated before 2030.

IV. Corporate Developments
1. Integrated Industry Leaders Achieve Profit Multiples:
- Binhu Chemical: Reported RMB 344 million in attributable net profit for H1 2026, up 208.25% year-on-year, benefiting from its integrated chlor-alkali + PO business model, which locks in raw material costs.
- Satellite Chemical: Attributable net profit ranged between RMB 6 billion and RMB 7 billion for H1 2026, up 118.68%–155.13% year-on-year, underscoring strong vertical integration advantages.
- Wanhua Chemical: Net profit ranged between RMB 9.8 billion and RMB 10.4 billion for H1 2026, up 60.05%–69.85% year-on-year, driven by technological leadership in PO/CHP production.

2. New Capacity Rollouts:
- An additional 900,000 tons/year of PO capacity is expected to come online in H2 2026; however, most projects are slated for Q4 commissioning, limiting their contribution to annual output. Facilities operated by Zhenhai Refining & Chemical and Guangxi Huayi have already commenced operations.

V. Analysis and Outlook
1. Short-Term Price Trend:
- Range-Bound & Slightly Weak: July prices are supported by seasonal maintenance and cost floors, yet new capacity releases weigh on sentiment. In Shandong province, spot cash ex-factory prices are likely to trade within RMB 7,500–8,500 per ton. The H2 2026 average price is forecast at RMB 8,020 per ton—down 15.5% versus H1.
- Narrowing Volatility: With geopolitical premiums fully dissipated, the market has reverted to fundamentals-driven pricing, resulting in significantly reduced price swings.

2. Medium-to-Long-Term Trends:
- Oversupply Pressure: Capacity expansion will continue through 2026–2030, with supply growth substantially outpacing demand growth (projected at 10.5%). Average industry operating rates are set to decline rapidly, compressing profitability.
- Accelerated Green Transition: Hydrogen Peroxide Propylene Oxide (HPPO) process share has jumped to 68%, while the chlorohydrin method continues phasing out. Technology-driven cost reductions are evident—integrated producers enjoy cash costs over RMB 1,600/ton lower than non-integrated peers.
- Structural Demand Growth: Emerging sectors—including new-energy vehicles and cold-chain logistics—are generating incremental demand, though insufficient to fully absorb expanding supply.

3. Key Risks:
- Recurrence of Geopolitical Conflict: Could trigger sharp, short-term spikes in propylene feedstock prices—but weak demand absorption may again cause rapid price reversal.
- Policy Tightening Beyond Expectations: Further internalization of carbon costs could further squeeze margins and accelerate the retirement of inefficient capacity.