Overview

In October, China’s propylene oxide (PO) market showed a strong upward trend, supported by limited supply pressure, firm raw material costs, and improving downstream demand. After a moderate increase before the National Day holiday, the market briefly entered a wait-and-see phase after the holiday. However, with tighter spot availability and stronger purchasing activity from downstream industries, prices quickly regained momentum.

As of October 9, mainstream ex-factory prices of propylene oxide in Shandong reached around RMB 11,200/MT, increasing by RMB 800/MT (7.69%) compared with RMB 10,400/MT on October 1. Market supply remained relatively tight, while cost-side support continued to strengthen.

Supply: Limited Inventory Pressure; Maintenance Plans May Tighten Supply Further

On the supply side, as of October 9, China’s propylene oxide production remained stable at approximately 19,800 MT/day, with an operating rate of around 73.93%.

Most major producers maintained normal operations. However, some suppliers reduced their sales volumes during the previous price increase cycle, resulting in lower market inventories. During the National Day holiday, trading activity in northern China remained relatively active, and many northern plants entered the post-holiday period with limited stocks.

Meanwhile, some southern producers continued to supply local demand while transferring part of their products to northern markets, helping maintain a balanced but tight supply situation.

Looking ahead, several producers in Shandong, including Binhua Dongrui, Jinling, Sanyue, and Huatai, are expected to reduce operating rates or carry out maintenance around mid-October. Xinyue may increase external supply after completing maintenance at related facilities, while Wanhua may reduce production volume in the second half of the month.

Although these maintenance plans may appear significant, the actual reduction in marketable supply is expected to be smaller than the reduction in total production capacity. Market participants will continue monitoring the implementation of these plans.

Demand: Post-Holiday Restocking Supports Market Confidence

On the demand side, trading activity remained relatively active during the holiday period due to rising market expectations and stable prices. After the holiday, market sentiment improved significantly, shifting from cautious to more optimistic.

With propylene oxide suppliers facing limited inventory pressure and raw material prices providing strong support, downstream buyers increased procurement activity.

At the same time, prices in the polyether industry continued to rise, improving downstream profit margins and encouraging additional purchasing. The widening price spread between polyether and propylene oxide also strengthened market confidence.

In the propylene glycol sector, Weierse resumed production and gradually reached full operating capacity, while Yulin Baijiarui is expected to restart operations soon, providing additional demand support.

In the short term, downstream purchasing is expected to remain active, supported by new orders. However, as PO prices continue moving higher, some buyers have started to adopt a more cautious approach, questioning the sustainability of further increases.

Cost Support: Propylene Prices Break Above RMB 10,000/MT

Raw material costs provided another important factor supporting propylene oxide prices.

During the National Day holiday, propylene prices climbed to around RMB 9,900/MT before stabilizing. After the holiday, supported by stronger international crude oil prices, propylene prices moved above the RMB 10,000/MT level.

As of October 9, mainstream propylene prices in Shandong reached approximately RMB 10,295/MT, up RMB 495/MT (5.05%) compared with the beginning of October.

The increase in propylene costs became one of the main drivers behind the two rounds of PO price increases.

Currently, the PO-propylene price spread remains relatively narrow, with theoretical profits estimated at around:

• Chlorohydrin process: approximately RMB -547.85/MT
• HPPO process: approximately RMB -1,168.1/MT

This indicates strong cost pressure on producers and provides continued support for propylene oxide prices.

Liquid chlorine prices are also expected to remain firm, further increasing production cost pressure.

Market Outlook: Prices Expected to Remain Strong with Attention on Supply Changes

In the short term, the propylene oxide market is expected to maintain a positive trend.

The main supporting factors include:

• Limited spot supply after the holiday
• Higher propylene raw material costs
• Strong downstream restocking demand
• Expected maintenance activities in mid-October
• Improving sentiment in related industries

However, as prices move to higher levels, buying enthusiasm may gradually slow. The market will focus on:

1. The actual impact of mid-month maintenance plans
2. The stability of downstream demand
3. Changes in supplier shipment plans
4. Sustainability of high price levels

Overall, propylene oxide prices are expected to remain firm in the near term, with potential further increases depending on supply-demand balance and cost developments.