Propylene oxide struggles

Propylene oxide market review for the first half of 2023

Market performance and price volatility

As time enters the end of June, the first half of the chemical market has ended. Looking back on the past six months, the market has changed a lot, and the propylene oxide market has been up and down like a roller coaster, which is staggering. Since the price fell to the bottom in January and began to rebound, the propylene oxide market in the second quarter has been in a volatile stage. So far, according to the statistics of Chemical Online, the domestic propylene oxide market has only risen by 3.7% as a whole from January to June. The lowest price is around 6,600 yuan, and the highest price has not crossed the 9,000 yuan (ton price, the same below) mark. The overall price difference is 2,300 yuan, while the average price is far lower than the same period last year.

Analysis of supply and demand factors

The reason for this situation is mainly caused by supply and demand factors. Propylene oxide, as an important petrochemical basic raw material, is mainly used to prepare polyether polyols, and the end point product is polyurethane foam material, which is used in automobiles, refrigerators and real estate industries. Since March, manufacturers have promoted the market through rotating maintenance or burden reduction. According to statistics, from March to June, a total of nearly 1.40 million tons of production capacity was involved in parking or burden reduction, including Tianjin Dagu, Dongying Huatai, Jilin Shenhua, Shandong Xinyue, Shandong Jinling, Shandong Binhua, Liaoning Fangda Jinhua, CNOOC Fine Chemicals and so on. Due to the sharp decrease in domestic end point demand such as freezing and thermal insulation in the first half of the year, the polyether industry has a low operating rate, and the market has been sluggish. The highest price in March remains at the same level as the lowest price in 2015. The sluggish polyether market has limited procurement of raw materials, weak demand support, and industry players maintain rigid demand procurement, making it difficult to boost the upstream market. The short-term supply crunch and long-term demand weakness have formed a tug of war, resulting in ups and downs in the cyclopropylene market, which has been in a weak and volatile state.

Capacity Status and Future Outlook

In recent years, our country's propylene oxide market has developed rapidly. Coupled with the addition of Yantai Wanhua 200,000 tons/year and Huntsman's new 240,000 tons/year plant in 2015, the total production capacity of the domestic propylene oxide market has reached about 3.25 million tons, of which China Shipping Shell 320,000 tons is the first. Although there are many domestic manufacturers of propylene oxide, most of them are old devices with small production capacity using chlorohydrin method. The single production capacity is far smaller than that of large international manufacturers, and many devices are about to be phased out. After 2016, there are still projects with a total production capacity close to 1.50 million tons planned to start construction. At present, the growth of supply has far exceeded the growth of demand. With the increasing self-sufficiency rate of propylene oxide in our country in recent years, the pattern of supply in short supply has gradually shifted to a balance of supply and demand, and the scene of supply exceeding demand will also be approaching with the continuous deployment of future production capacity. Increasing exports is undoubtedly the most effective and fastest way to relieve domestic pressure.

Export policy changes and data

Since December 2007, our country has banned the export of propylene oxide processing trade, which has led to the basic net import market of cyclopropylene in our country in recent years, but this year this situation has quietly changed. In order to reduce the pressure on domestic production and sales, accelerate the transformation of the industry, and promote the replacement of traditional processes by clean processes, in November 2015 the state issued a notice to allow the export of propylene oxide produced by direct oxidation. This export policy directly opened the door to the export of propylene oxide in our country. According to customs statistics, from January to May 2016, our country imported 159,000 tons of cyclopropylene, an increase of 14.7% year-on-year, and exported 7057.2 tons, an increase of 3959.9% year-on-year. Although in the face of huge production and import volume, the export volume is like a big tree, but it has to be admitted that the export of cyclopropylene in our country has taken a big step. The growth of export volume has opened up a new way for the domestic cyclopropylene market, which can relieve market pressure and benefit the market outlook.

Future market forecast

In the blink of an eye, half a year has passed, and the cyclopropylene market is still struggling at a low level, and the weak trend is difficult to change. The end point of July-August is that the industry enters the traditional off-season, and the demand for propylene oxide is further reduced. At that time, the price of propylene oxide may further decline, and it is difficult to say whether the cyclopropylene market will rebound significantly this year.