Since November, the domestic propylene oxide market has held at a relatively high operating level, yet the overall trend has been a fluctuating decline, with adjustments driven by cost pressures and supply-demand dynamics. As of November 11, the mainstream transaction price in the Shandong market stood at 11,050 yuan/ton (cash, ex-factory), a cumulative decrease of 1,150 yuan/ton from the 12,200 yuan/ton recorded at the beginning of the month, a drop of 9.43%. The market has shown a modest recovery, but without meaningful positive support the price resilience may prove limited. Buyers sourcing propylene oxide chain derivatives can review our propylene glycol and glycol ethers portfolio.
Supply Side: Output High, Adjustments Offset
As of November 11, domestic propylene oxide daily output rose to 18,100 tons, with the capacity utilization rate at 67.63%, a slight decrease of 0.25 percentage points from the beginning of the month. This remains relatively high for the year, while marketable volume stayed broadly stable at around 10,600 tons/day. Major moves this month included Hangjin, Tianhua, Binhua, Qixiang and Lihuayi slightly reducing operating rates, Xinyue raising its rate, and Jinling and Yida restarting. These adjustments were concentrated in northern plants and largely offset one another.
Looking ahead, next week should see Hangjin and Sanyue appropriately raising operating rates, Xinyue increasing its own consumption and reducing marketable volume, Guoen planning a restart, and Zhejiang Petrochemical’s propylene oxide and polyether plants entering annual maintenance simultaneously. The last item primarily affects the polyether market. Propylene oxide marketable volume is expected to stay relatively stable after offsetting, operating in a slightly loose state. Close attention should be paid to whether temporary production cuts emerge under cost pressure.
Demand Side: Cautious Buying, Fragmented Orders
Given the volatile price swings in the propylene oxide market, downstream demand remains cautious. Driven by a "buy high, sell low" mentality, most buyers are waiting for a clear upward signal before making essential purchases. Overall, purchasing is fragmented, fluctuating rapidly on low volume. With propylene oxide prices relatively high this month, feedback from downstream industries indicates poor transmission to end users, suppressing buying interest. This produces a recurring cycle across the chain: upstream price increases, cost pressure, propylene oxide adjustments, downstream transmission, end-user resistance, downstream cutbacks, and finally a softening of propylene oxide prices.
Looking ahead, after this round of increases reaches 11,000-11,100 yuan/ton (cash, ex-factory) in Shandong, downstream buyers are likely to stay cautious with limited market risk. They may release some essential demand and sell during stabilization periods, but sustainability is limited. In mid-month, Wudi Dexin and Shenghong polyether plants are expected to restart, while Zhejiang Petrochemical undergoes maintenance; actual implementation will be closely monitored.
Raw Material and Cost Structure
Propylene: Surge Then Retreat
The main raw material, propylene, surged in November before falling back. As of November 11, the Shandong reference price was 10,450 yuan/ton, down 11.06% from 11,750 yuan/ton at the beginning of the month. The fading geopolitical premium and lower crude oil prices weakened cost support. Increased spot circulation in northern China, combined with widespread downstream losses and mostly immediate demand, led to thin trading and a continued downtrend. However, the average price difference between propylene oxide and propylene in November was only 171.36 yuan/ton, with some instances of price inversion, indicating relatively strong cost support.
Liquid Chlorine and Process Margins
Liquid chlorine also fluctuated at relatively high levels, and representative processes continued to incur losses. The theoretical profit for the chlorohydrin process was -1,056.6 yuan/ton, and for HPPO -1,389 yuan/ton. Propylene is expected to remain weak in the short term, with the propylene oxide-propylene spread widening slightly. Still, the sharp decline in propylene prices weighs on market sentiment; although cost pressure on many processes has eased somewhat, producers remain in the red. Crude oil volatility should be monitored closely.
Short-Term Outlook: Stabilization and Consolidation
In the short term, the market has stabilized at current levels. Increased shipments from operating plants over the past two days have eased pressure, but without significant shifts in supply, demand or costs, and without positive catalysts, prices lack substantial support. After downstream restocking, prices may weaken again, though cost support is limited. We expect propylene oxide prices to fluctuate narrowly between 10,800-11,200 yuan/ton. A significant adjustment in crude propylene prices or supply shutdowns could provide some support for a rebound. A firmer trend will require a positive catalyst.
