In July, the domestic propylene oxide market followed a trajectory of initial weakness followed by a rebound and a surge to high levels, before showing signs of softening at month-end. At the start of the month, prices hovered near yearly lows (with a reference price of 7,800 RMB/ton on July 1); subsequently, driven by a combination of bullish factors, the market rallied strongly starting July 9, with spot prices reaching 10,000 RMB/ton by July 27. However, signs of softening emerged at high price levels as the month drew to a close. Data from the SunSirs monitoring system indicates that as of July 28, the benchmark price for propylene oxide stood at 9,400.00 RMB/ton, marking a 20.51% increase compared to the beginning of the month.

On the feedstock side, propylene prices climbed to high levels during the first half of the month; driven by the high costs of propylene and energy, all production pathways for propylene oxide (PO) fell into the red. This cost-price inversion eliminated any room for producers to offer price concessions, leading to an industry-wide consensus on supporting prices. In the second half of the month, although propylene prices retreated—thereby weakening the cost support for PO—the PO sector was simultaneously undergoing large-scale maintenance shutdowns and operating rate reductions. This tight supply situation lent resilience to PO prices, causing them to rebound sharply after a brief dip. According to the SunSirs monitoring system, the benchmark price for propylene stood at 7,767.67 RMB/ton as of July 28, marking a 4.81% increase from the beginning of the month (7,411.00 RMB/ton).

Supply side: In July, multiple domestic propylene oxide units underwent scheduled shutdowns or operated at reduced rates. Shutdowns included facilities at Zhenhai (Phase II), Guo'en, Yida, Qixiang, Ruiheng, and Lianhong, while plants such as Binhua and Sanyue maintained low operating loads. Daily industry output contracted to around 16,000 tonnes, and the capacity utilization rate fell to 57.48%. Spot market supply was tight as producers restricted sales volumes, and commercial inventories continued to decline to low levels.

On the demand side, the downstream sector for propylene oxide saw a brief period of concentrated restocking in early July, yet the overall trend remained somewhat sluggish. Regarding the primary downstream sector—polyether polyols—July and August mark the traditional off-season, with demand across industries such as construction insulation, upholstered furniture, and automotive interiors remaining lackluster. The construction insulation sector remained in a slow period due to construction cycles; the upholstered furniture sector saw reduced operating rates as foam manufacturers faced disruptions—caused by a slowdown in real estate completion cycles and high-temperature weather—that hindered foaming operations; and the automotive interior sector experienced a contraction in demand as some automakers implemented summer shutdowns due to the heat. In other downstream areas, the propylene glycol market saw buying limited to immediate needs, resulting in lackluster trading activity; capacity utilization at unsaturated resin plants remained low at around 34%, reflecting a trend of stability with a weak undertone. Overall, operating rates across the propylene oxide downstream sector remained low, with both polyether and unsaturated resin production running at reduced levels.

Overall Outlook: Analysts at SunSirs believe that geopolitics remains the primary source of uncertainty in the short term; supported by cost factors and a tight supply situation, prices are more likely to rise than fall. In the medium to long term, with 900,000 tons/year of new capacity expected to come online successively during the second half of the year, the market will return to being driven by supply-demand fundamentals. Price volatility is likely to narrow, with the market generally expected to fluctuate within a limited range. Key factors to monitor include price trends for the feedstock propylene, operational status of production units, and the volume of new downstream orders.

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