Propylene oxide is on fire again
Propylene oxide prices hit a new high in 2017
Price Action Review
After bottoming out in early December, propylene oxide has been making great progress and climbing steadily. Taking East China as an example, the price has risen from about 11,550 yuan/ton at the beginning of the month to about 14,000 yuan/ton at present. The increase in the past month has reached 21.2%, setting a new high since 2017.
Analysis of the reasons for the price increase
According to the analysis of the small editor, this wave of rally is driven by the tightening of the supply side and the commissioning of new downstream devices. After entering December, there were continuous news of plant failure or maintenance in the market. Xinyue, Sanyue, Binhua, Huatai, etc. have successively reduced negative production or stopped news, and the overall market supply has tightened. In addition, after October, Jilin Shenhua 400,000 tons of polyether plant went into operation, the manufacturer's propylene oxide external sales decreased, the inventory in the northern region was low, and the price rose one after another.
In fact, the entire 2017 propylene oxide industry has been plagued by supply shortages, and the market has remained high. According to chemical online statistics, the average annual price of propylene oxide is about 10,900 yuan/ton, up 18.5% from the average price of 9,200 yuan/ton in 2016. Our country's propylene oxide production is mainly based on the chlorine alcohol process. By the end of 2017, the production capacity is about 1.90 million tons/year, accounting for about 51% of the total domestic production capacity; the HPPO process capacity is about 400,000 tons, accounting for about 11% of the total domestic production capacity; the rest is co-oxidation. Due to the serious pollution of the chlorohydrin process, the state has banned new such projects, and the co-oxidation process and HPPO lack mature technologies in France, so the new production capacity of the propylene oxide industry has been relatively stable in recent years. In 2017, due to increased environmental supervision, most chlorohydrin process enterprises were forced to limit or stop production, while the operating rate of HPPO propylene oxide plants has been low, resulting in relatively tight domestic propylene oxide supply, and the overall price is in a high position.
In addition, the impact of imports should not be underestimated. According to customs statistics, as of November 2017, our country's propylene oxide imports were 201,000 tons, while the import volume in the same period in 2016 was 283,000 tons, a decrease of 29% year-on-year. From the analysis of importing countries, our country's imports of propylene oxide from the United States in 2017 dropped sharply from 113,000 tons in 2016 to 34,000 tons, a decrease of 79,000 tons year-on-year. The reason is that the main US propylene oxide manufacturers encountered force majeure due to Hurricane Harvey hitting Texas at the end of August 2017, which greatly reduced the export volume of propylene oxide.
The sharp increase in demand is also another important reason for the shortage of propylene oxide supply. More than 80% of propylene oxide is used in the production of polyether polyols in China, and about 0.8 tons of propylene oxide is consumed for each ton of polyether polyol produced. In the second half of 2017, Jilin Shenhua 400,000 tons and Quangang Tianjiao 40,000 tons of polyether projects were put into operation in China, while only Jinling Huntsman's 240,000 tons of production capacity was put into operation in propylene oxide. The imbalance between supply and demand drove the rise in propylene oxide prices at the end of the year.
2018 Market Outlook
In 2018, the supply shortage of propylene oxide industry will continue. In terms of new capacity, only Hongbaoli's 120,000-ton co-oxidation unit is planned to be put into operation by the end of 2018. In addition, the import side is expected to return to the level of 2016. Under the general situation of stricter environmental protection policies, the operating rate of the entire industry will not change greatly. Compared with the strong demand for downstream polyurethane, the shortage of supply in the propylene oxide industry will exist for a long time. In addition, the environmental protection tax in our country will be officially launched on January 1, 2018. There is reason to believe that propylene oxide will perform better in the future market.
