Price trend

In the first half of January, the domestic propylene oxide market continued its strong momentum, with prices rising significantly. According to the monitoring system of SunSirs, as of January 13th, the benchmark price of propylene oxide was 8,333.33 RMB/ton, a 7.76% increase compared to January 1st. This price increase was the result of a combination of positive factors, and the market is expected to maintain a strong performance in the short term.

Market analysis

Supply Side: The unexpected tightening of market supply is the basis for this price increase. First, several major production facilities in various regions experienced reduced output or shutdowns. Several facilities in the main production area of Shandong saw reduced operating rates, while key facilities in East China, such as Zhenhai Phase II and Sinochem Quanzhou, were also undergoing maintenance shutdowns. This resulted in a relatively low national capacity utilization rate of 73.47% on that day. Second, industry inventory has fallen below the "safety cushion." As of January 9th, the overall industry inventory was approximately 40,000 tons, far below the safety warning line. Factory inventories were generally low, and spot supply remained tight. The sudden tightening of the supply-demand balance directly strengthened producers' willingness to maintain high prices.

Demand Side: The strong demand is the core engine driving price increases. On the one hand, the downstream polyether industry was experiencing expansion. For example, new plants such as those of Shandong Longhua and Guangxi Tongkun have come online, directly increasing the rigid demand for propylene oxide. On the other hand, a key policy was creating a "last-minute rush" effect. According to a Ministry of Finance announcement, the export tax rebate policy for primary-form polyethers will be canceled from April 1, 2026. To complete orders before the policy window closes, downstream export demand has seen a "pre-emptive surge," with a large number of export orders being brought forward for concentrated production in the first quarter. At the same time, domestic customers were also proactively replenishing their stocks due to concerns about future raw material price increases. The combined effect of domestic and international demand has created a vibrant market trading atmosphere, effectively absorbing the high-priced supply.

Raw materials: The upward trend in the market price of propylene, a key raw material, also contributed to the price increase and provided solid cost support. According to the monitoring system of SunSirs, as of January 13th, the benchmark price of propylene was 5,921.00 RMB/ton, a 3.56% increase compared to the beginning of the month (5,717.67 RMB/ton).

Market outlook

According to analysts at SunSirs, the market's bullish sentiment has rapidly intensified due to the clear expectation of a tight supply-demand balance for propylene oxide. Downstream companies have shifted from a wait-and-see approach to actively replenishing their inventories to cope with potential price increases and supply shortages. Simultaneously, the price of propylene, the main upstream raw material, showed a steady upward trend in mid-January, providing solid cost support for propylene oxide. Overall, driven by low inventory levels, anticipated demand increases, and tight supply, the central price of propylene oxide is expected to continue rising in the short term. The future market direction requires close monitoring of the restart progress of large-scale facilities such as those at Sinochem Quanzhou, and the actual sustainability of the "rush to export" trend in polyether.

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