According to China Chemical Industry News, propylene oxide (PO)—the second-largest downstream derivative of propylene—serves as a crucial link between upstream petrochemicals and downstream sectors such as new energy and advanced materials. At the recently held "2026 (8th) Propylene Oxide Industry Chain Innovation and Development Conference and Epichlorohydrin Technology and Market Exchange Meeting," it was revealed that my country's PO industry has officially entered an era of competition for existing market share, characterized by low operating rates and pressure on overall profitability. In this context, how can the industry overcome obstacles and move toward sustainability?
Experts point out that green processes and high-end products have become central themes for future development. The industry must focus on the green upgrading of processes, the optimization of production capacity structures, and the development of high-end products to transition into a new phase of high-quality, sustainable growth.
Industry Enters Era of Competition for Existing Market Share; Shifts Toward High-Quality, Sustainable Growth
After nearly a decade of development, my country's PO industry has achieved a high level of self-reliance and control.
According to Tu Qinghua, Deputy Chief Engineer at the Planning Institute of Petroleum and Chemical Industry, my country's PO production capacity reached 8.66 million tons in 2025, accounting for approximately 60% of global capacity, with a self-sufficiency rate as high as 98%. In terms of the market, domestic apparent consumption of PO in 2025 was approximately 6.2 million tons, a year-on-year increase of 12.7%.
While production capacity expanded rapidly, issues gradually surfaced. In 2025, the industry's operating rate stood at only 70%, marking its entry into a stage of competition for existing market share. This trend was reflected in pricing: the average domestic market price for PO in 2025 was approximately RMB8,400—a significant year-on-year decline—placing the industry's overall profitability under pressure.
"Inefficient production capacity within my country's PO industry will face severe pressure to be phased out. This reflects not merely a cyclical imbalance between market supply and demand, but a pressing need to upgrade the industrial structure. Given the massive production capacity base, what is the core issue we face?" Tu Qinghua’s answer is a shift toward "high-quality development"—moving away from the previous focus on scale over quality and toward a model defined by high quality and sustainability. She pointed out that there are three main pathways for the industry to achieve transformation and upgrade: first, technological upgrading and green transformation, promoting the replacement of outdated production capacity with clean processes; second, industrial integration and structural optimization to increase market concentration; and third, product high-endization, tapping into high-value-added "new blue ocean" markets such as electrolytes for lithium-ion batteries in new energy vehicles.
"The PO industry is shifting from scale-based expansion to competition based on quality and efficiency; green processes and high-end products will become the core growth drivers of the future," said Tu Qinghua.
Significant Progress in Green Transformation; "Dual-Core" Processes Dominate the Market
Green transformation represents the first major "test" facing the industry.
Historically, the primary process route for the PO industry was the chlorohydrin method; however, this process suffers from significant issues regarding the "three wastes" (wastewater, waste gas, and solid waste) and faces heavy environmental pressure. The currently implemented Guidance Catalogue for Industrial Structure Adjustment (2024 Edition) stipulates that facilities using this process must meet specific exemption criteria by December 31, 2025, or face elimination. "Green processes will benefit from both policy support and market preference, whereas enterprises relying on traditional processes will confront increasingly stringent environmental compliance pressures and cost challenges; technological upgrading is therefore imperative," Tu Qinghua noted.
At the conference, it was reported that the industry has taken proactive measures in recent years, achieving substantial technological progress. Currently, the main alternative process routes include the hydrogen peroxide oxidation method (HPPO) and the propylene oxide/styrene co-production method (PO/SM). Wu Feike, General Manager of Changzhou Ruihua Chemical Engineering Technology Co., Ltd., pointed out that both processes offer advantages such as environmental friendliness and strong economic returns.
Wu Feike further noted that my country has broken the foreign monopoly on HPPO technology; multiple enterprises are planning to launch production facilities, and even safer, lower-energy-consumption HPPO technologies are currently under development. For instance, Peng Xinxin, a researcher at the Research Institute of Petroleum Processing (RIPP) under Sinopec, mentioned that the HPPO technology developed by the institute has already been implemented in a 100,000-ton-per-year industrial facility at Hunan Petrochemical.
Progress in PO/SM technology has been even more rapid. According to Wu Feike, Ruihua’s PO/SM technology has already been implemented in several major projects; units for Zhejiang Petrochemical (270,000/600,000 tons/year) and CITIC Guoan (80,000/200,000 tons/year) have successfully started up, validating the process's advanced nature, safety, and environmental friendliness. Additionally, the in-situ direct oxidation (HOPO) method is viewed as a promising process route; Ruihua is currently collaborating with the East China University of Science and Technology to launch a pilot plant.
However, Wu Feike also noted that compared to the chlorohydrin process, the HPPO process entails higher consumption and lacks the value-added benefits of co-products, while the PO/SM process involves a long process chain and significant investment. The industry is currently working to tackle these pain points—for example, the Beijing Branch of China Huanqiu Contracting & Engineering Corporation is optimizing PO/SM units, and Yichang Supeng Technology Co., Ltd. has developed a high-quality hydrogen peroxide production method specifically for the HPPO process.
Technological innovation has driven a shift in industry metrics: one figure has risen while another has fallen. According to Tu Qinghua, the share of chlorohydrin-based production capacity dropped from nearly 60% in 2015 to 15.3% in 2025. Meanwhile, the share of HPPO capacity rose from 13.2% to 30.8%, and the PO/SM share increased from 20% to 39.5%, establishing the latter two as the industry's "dual core" processes.
Advancing into the Main Battlefield of Emerging Industries and Championing Domestic Substitution
Moving toward high-end products represents the second major "test" facing the industry and will be a key focus for future development.
"Currently, the self-sufficiency rate for high-value-added products in the industry is less than 40%, yet these products command premiums of 30% to 80%, indicating immense market potential," Tu Qinghua noted. He emphasized that the industry must focus its product R&D and technological upgrades on the vast arenas of emerging sectors—such as new materials, new energy, and next-generation information technology. Among these sectors, the new materials industry serves as the core battleground; key examples include high-end polyurethane (PU) used in new energy vehicles and construction, as well as polycarbonate diols utilized in photovoltaic encapsulant films and lithium-ion battery binders. The new energy industry acts as a high-growth engine; beyond electronic-grade propylene glycol (PG) and its downstream derivative dimethyl carbonate (DMC), industrial-grade PG—a precursor for wind turbine blades—also warrants attention. In the realm of next-generation information technology, the focus should be on domestic substitution—particularly for electronic-grade propylene glycol ethers—where market demand is projected to grow at an annual rate exceeding 10%, signaling immense potential.
Tu Qinghua highlighted two key areas. The first is the new energy vehicle sector. As global penetration rates for new energy vehicles rise, demand for lithium-ion battery electrolytes remains robust. Dimethyl carbonate (DMC), a core solvent in these electrolytes, boasts exceptionally promising market prospects. "Establishing DMC production capacity means securing a pivotal node in the new energy industry chain. DMC-driven demand for propylene oxide (PO) is projected to grow at a compound annual rate of 7% to 8% over the next five years," Tu noted.
The second area comprises high-end manufacturing sectors such as semiconductors and display panels. She pointed out that these are primary application areas for electronic-grade PO and propylene glycol (PG), which serve as cleaning agents and solvents for photoresists. "These sectors are characterized by high technical barriers and immense added value, with a steadily rising demand for ultra-high-purity chemicals; they represent a crucial breakthrough point for chemical enterprises seeking to transition toward high-end manufacturing," Tu said. "Domestic substitution will be the dominant theme in the coming years; companies that achieve early technological breakthroughs and ensure stable supply will capture significant market share and profit returns."
Comprehensive Optimization of Capacity and Quality: Embracing a New Era Across the Industry Chain
Experts identify three major trends shaping the industry's future development.
First is the continued expansion of production capacity. Forecasts indicate that as refining and chemical projects come online, domestic PO capacity will grow in tandem, with an average annual growth rate exceeding 8%. Mature process technologies and a comprehensive industrial structure will position PO as the preferred choice for downstream propylene-based facilities. Meanwhile, although the rate of capacity expansion is decelerating, it continues to outpace the growth of demand, making exports a potential new avenue for the future.
In terms of consumption patterns, the shift toward high-end polyether polyols (PPG) will drive the industry's primary growth. Wu Feike noted that PPG currently accounts for approximately 78% of downstream propylene oxide (PO) products; it is primarily used to manufacture polyurethane (PU) materials, which find wide application in sectors such as furniture, automotive manufacturing, and home appliances. Tu Qinghua projects that by 2026, new PPG production capacity will reach 2 million tons per year, with product types undergoing a comprehensive upgrade from general-purpose grades to high-performance and low-carbon variants. Market demand for high-end PPG will further drive a transformation in PO quality standards.
Secondly, as the industry chain undergoes rapid integration, advantages related to integration and cost-efficiency will increasingly differentiate market players. Integrating upstream and downstream operations—extending into areas like PPG and electronic chemicals—can significantly reduce costs by 15% to 20%. Tu Qinghua cited Wanhua Chemical as an example; the company has achieved exceptional returns through its integrated layout, with an internal product consumption rate approaching 70%, thereby drastically reducing reliance on external markets. Its PO gross profit margin exceeds the industry average by 1,200–1,800 yuan per ton, demonstrating a clear profitability advantage.
"For mid-sized propylene oxide enterprises, there are multiple pathways to achieve industrial integration and structural optimization," Tu Qinghua suggested. He recommended that companies first focus on process optimization to enable flexible production—switching product types based on market supply and demand. Secondly, they should pursue clustered, collaborative development within their regions. Thirdly, they should leverage the agility inherent in smaller enterprises to enter high-value-added downstream markets.
Thirdly, process routes are diversifying. Forecasts indicate that by 2030, the market share of the chlorohydrin process will drop to 3.8%, with clean production technologies dominating the market. Routes such as PO/SM and HPPO are expected to capture a combined market share of 35.1%, remaining the dominant technologies.
"Faced with new opportunities and challenges, the industry must resolutely phase out outdated chlorohydrin capacity, strictly control low-level redundant construction, and focus resources on differentiated products characterized by high entry barriers and high added value. At the same time, we must deepen collaborative innovation among industry, academia, and research institutions, using process optimization and technological iteration to lower the initial investment and long-term operating costs of new technologies like HPPO," Tu Qinghua said. "Through collaborative synergy across the industry chain, we will usher in a new era of high-quality development."
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