SunSirs: Triple Resonance, Propylene Glycol Surged Then Entered a Correction Phase

In the first half of March, the price of industrial-grade propylene glycol surged rapidly due to the combined effects of soaring propylene oxide prices (cost), rush to export polyethers (demand), and tight spot supply (supply). As raw material prices have fallen back from their peak and the rush to fulfill orders has come to an end, the market is now in a digestion and adjustment phase.

According to the commodity market analysis system of SunSirs, as of March 12, the average production price of propylene glycol in Shandong Province was 7,300 RMB/ton, a significant increase of 22.01% compared to the beginning of the month.

Driving factors

Cost side: Propylene oxide surge pushed prices up, recently peaking and then falling back

The price of raw material propylene oxide (PO) has risen sharply since the beginning of March. On March 12, the reference price of propylene oxide on the SunSirs was 10,350 RMB/ton, an increase of 29.38% compared with the beginning of the month.

The surge in international crude oil prices, rising propylene prices, and partial reductions in operating rates at PO plants have led to a tightening of both costs and supply. Propylene glycol producers are facing increased cost pressures and have been forced to significantly raise their prices, becoming the core driver of this round of price increases. Yesterday, the PO market experienced a wide decline, entering a temporary period of consolidation.

Supply side: Tight spot supply coupled with manufacturers' reluctance to sell fuels strong upward pressure on prices.

Shandong plant operations remain generally stable, resulting in tight spot market circulation. Some factories are holding back sales, exacerbating market tensions. Low inventory levels from previous periods, coupled with rising costs, have fueled manufacturers' strong desire to raise prices, leading to a continuous upward trend in quotations.

Demand Side: A surge in orders before tax refunds expired, leading to downstream resistance to high prices.

Polyether export rush: Affected by the cancellation of export tax refunds for polyether polyols starting April 1st, polyether factories maintained high operating rates in the first half of March to secure tax refunds and rush to fulfill export orders. This resulted in a significant increase in demand for PO and propylene glycol, becoming the core driver of demand.

Limited follow-up from domestic demand: Demand for unsaturated resins, coatings and other industries has rebounded, but after the rapid price increase, downstream resistance quickly emerged, with low acceptance of high prices and sluggish actual transactions. Procurement is mainly for maintaining basic needs, limiting the room for further price increases.

Weakening expectations for the future: Order rush will largely end by mid-March, polyether operating rates may decline, and propylene glycol procurement will return to rational, small-volume, on-demand orders, leading to a shift from increasing to decreasing demand.

Market Outlook

In the second half of March, the propylene glycol market will shift from a "unilateral rise" to a pattern of high-level decline and range-bound fluctuation.

On the cost side: propylene oxide prices surged and then fell, weakening cost support;

On the supply side: plant operations remained stable, spot supply gradually eased, and manufacturers' willingness to ship increased.

On the demand side: With the rush to complete orders for polyether tax refunds ending, domestic demand is weak, resulting in an overall trend of initial increase followed by a decrease.

Propylene glycol prices are expected to face short-term downward pressure and enter a consolidation phase. The focus should be on monitoring the price trends of propylene oxide, changes in polyether operating rates, and the rate of inventory accumulation at factories.

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