A striking abnormal price inversion has swept China’s polyurethane raw material market since mid-May 2026: the spot price of flexible polyether polyol has fallen below propylene oxide (PO), its core upstream raw material. This counterintuitive pricing gap has confused many foam manufacturers, chemical traders and industry insiders. This article analyzes the real root of PO-polyether price inversion from supply concentration, downstream seasonal demand, cost logic and industry profit redistribution, and predicts the repair path of this abnormal market pattern.
Clear Price Inversion Data From Shandong Market
The price gap between flexible polyether and propylene oxide did not emerge overnight, but formed through a continuous downward trend of polyether prices. Taking mainstream market quotations in Shandong as the core reference standard:
On May 14, flexible polyether was already 250 yuan/ton cheaper than PO; the inversion range expanded to 650 yuan/ton on May 29, hitting the widest gap recorded in 2026. Although the price difference narrowed slightly in early June, the abnormal market pattern did not reverse completely. As of June 3, Shandong mainstream flexible polyether stood at 8,550 yuan/ton, while propylene oxide was quoted at 8,900 yuan/ton, maintaining a 350 yuan/ton inversion.
From January to April this year, soft foam polyether kept a positive profit spread above PO, and the profit space widened significantly in March and April. The sharp reversal starting in May fully proves that this price dislocation is not caused by temporary quotation errors, but reflects completely different pricing power of upstream PO and downstream polyether sectors.
Propylene Oxide: Concentrated Supply Brings Strong Price Support
The core reason why PO can hold firm amid weak overall chemical demand lies in its highly centralized production capacity layout. Compared with the polyether industry, PO manufacturers are fewer in number, production concentration is extremely high, and enterprises have differentiated production processes and cost thresholds.
Once market profits shrink or even turn negative, high-cost PO plants will actively adjust operating loads by reducing production load, shutting down devices or delaying restart plans. Active supply contraction forms strong bottom support for PO prices. Recently, after a previous round of price declines, PO quotations rebounded steadily, which fully shows PO prices are not passively dragged by weak terminal demand, but dominated by manufacturers’ production reduction and price protection mentality.
Flexible Polyether: Dispersed Capacity Is Restrained By Off-Season Downstream Demand
The polyether industry presents a totally opposite market landscape. In recent years, a large number of new polyether production capacities have been successively released, with numerous market participants of varying scales. Different manufacturers hold inconsistent inventory levels, pending order volumes and sales strategies. When overall market demand turns sluggish, enterprises will take the initiative to cut prices to clear stock and guarantee cash flow.
During June 1 to June 5, domestic soft foam polyether prices kept sliding. Factory offers for northern bulk polyether ranged from 8,300 to 8,700 yuan/ton, down 400-600 yuan/ton week-on-week. The core drag comes from downstream sponge, furniture and bedding industries entering traditional low season. End purchasers only place urgent small-batch orders, with almost no large-scale stock-up demand. At the same time, the sustainability of polyether export orders remains uncertain, so polyether lacks fundamental upward driving force to offset price pressure.
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Cost Structure Difference Widens Industry Profit Differentiation
In normal production logic, propylene oxide accounts for about 80% of polyether’s total raw material cost. Theoretically, polyether prices should rise and fall synchronously with PO prices following cost-plus pricing rules. However, the current market has abandoned simple cost pricing and is fully controlled by downstream acceptance, peer competition pressure and enterprise inventory burden.
Integrated chemical factories with self-produced PO resources possess prominent cost advantages and can sustain low quotation levels to seize market share. Independent polyether manufacturers that purchase PO externally face rigid raw material expenditure and bear far greater profit compression in the current price war. Even with weak prices of upstream propylene and liquid chlorine in early June, the cost side failed to form obvious upward driving force for PO, which further verified that supply adjustment, rather than raw material cost changes, dominates current PO price trends.
Future Market Trend & Three Paths To Repair Price Inversion
Three possible scenarios can realize the elimination of PO-polyether price inversion in the medium and short term:
PO manufacturers increase operating rates and cut quotations to digest inventory, narrowing the price gap with polyether;
Downstream foam, furniture and mattress industries enter peak consumption season, triggering centralized stock replenishment and pushing polyether prices upward;
Polyether factories continuously compress gross profit space to absorb the raw material premium, maintaining long-term low quotations.
Without obvious overall demand recovery in the short run, the third mode will become the mainstream market operation logic. This round of PO-polyether price inversion is not a simple cost mismatch, but a typical profit redistribution cycle under weak terminal demand. Upstream PO factories rely on high capacity concentration and flexible supply adjustment to stabilize product prices, while downstream polyether manufacturers bear profit shrinkage due to oversupply and insufficient orders. For polyether processors, the core market pressure is not merely high PO purchase costs, but the complete loss of price rising capability even when upstream raw materials hold firm prices.
Conclusion
The abnormal price inversion between propylene oxide and flexible polyether polyol in May-June 2026 exposes the huge gap in industrial chain pricing power. The concentrated supply of PO endows it with stronger risk resistance in off-season markets, while scattered polyether capacity and seasonal weak terminal demand lock its price in a downward channel. In the coming months, the repair of this inverted market will entirely depend on the recovery rhythm of downstream polyurethane foam demand, which also reminds foam product buyers to reasonably arrange raw material stocking cycles according to industry seasonal cycles.
