SunSirs: Cost-Side Momentum Faced Resistance, and Propylene Plycol Market Remained Deadlocked and Volatile

Core Market Trends

In March, the domestic propylene glycol market exhibited a complete operational trajectory characterized by rapid, cost-driven price surges; the accentuation of supply-demand imbalances at elevated price levels; and a gradual transition into a phase of market consolidation and stalemate.

According to the SunSirs Commodity Price Analysis System, as of March 27, the average production price of propylene glycol in the Shandong region climbed from 5,983 RMB/ton at the beginning of the month to 9,500 RMB/ton—a monthly increase of 58.77%—marking a new three-year price high.

In terms of market dynamics, prices trended steadily upward from early to mid-March, bolstered by surging raw material costs and tight supply. Following an accelerated rally in the latter part of the month, however—as supply recovered and demand weakness became apparent—market sentiment shifted toward caution; the upward momentum slowed significantly, and the market gradually entered a phase of high-level consolidation.

Market Logic Breakdown:

Cost Side: Propylene oxide prices are fluctuating at elevated levels; cost support remains present but is marginally weakening

The core rationale behind the recent surge in propylene glycol prices lies in the strong pass-through of upstream costs from propylene oxide. Throughout March, the propylene oxide market maintained its upward trajectory from elevated levels; on the supply side, market dynamics—characterized by production facility fluctuations and reduced operating volumes—allowed manufacturers to operate without inventory pressure, thereby providing rigid support for prices.

According to data from SunSirs, the growth trajectory of spot prices for propylene oxide has closely mirrored that of propylene glycol, with cumulative gains exceeding 58%. However, it is noteworthy that propylene serves as the most critical direct feedstock for propylene oxide. Impacted by supply chain disruptions stemming from geopolitical conflicts, propylene prices recently surged before undergoing a slight correction; this trend—coupled with diminishing downstream acceptance of high-priced propylene oxide—has intensified a wait-and-see sentiment among market participants, thereby dampening the momentum for further price increases. Consequently, propylene oxide prices are projected to exhibit a gradual stabilization in the short term, entering a phase of high-level consolidation. Concurrently, cost-side support for propylene glycol is shifting from a "unilateral upward push" to "maintaining stability at elevated levels," resulting in a significant attenuation of upward price momentum.

Supply Side: Initially tight, then easing; a recovery in operating rates in the latter half of the month is alleviating the supply deficit.

The supply landscape in March exhibited a distinct divergence: From early to mid-month, facility maintenance and low inventory levels resulted in tight market circulation; manufacturers demonstrated a strong inclination to uphold prices, and low-priced supplies were scarce—factors that provided a solid foundation for price appreciation. In the latter part of the month, however, as facilities undergoing maintenance gradually resumed production and operating rates recovered, market supply increased. This shift disrupted the previously tight supply-demand balance; consequently, the supportive influence of the supply side on prices further weakened, thereby setting the stage for a subsequent market correction.

Demand Side: Significant Resistance to High Prices; Purchasing Enthusiasm Cools Sharply

Weakness on the demand side constitutes the core factor weighing down market performance:

Domestic Downstream Sector: Production Cuts and Reduced Operating Rates—Downstream export demand for polyethers has weakened following the expiration of tax rebate policies. With prices having reached a three-year high, industries such as unsaturated polyester resins, pharmaceuticals, cosmetics, and coatings have shown limited willingness to accept these elevated price levels. Consequently, these sectors have widely adopted measures to cut production and reduce operating rates; their procurement focus has shifted toward meeting only immediate, essential needs via small-volume orders, while their willingness to replenish inventories has declined significantly. Overall demand has thus exhibited a trend of initial growth followed by a subsequent decline.

Export Orders Remain Sluggish: Although supported by essential demand, overall export order volumes have fallen short of expectations and are insufficient to effectively absorb high-priced inventory.

Strong "Wait-and-See" Sentiment Prevails: Traders and downstream manufacturers remain cautious regarding current high market price levels; trading activity has declined significantly, and a scenario characterized by "prices without transactions" is gradually becoming apparent.

Market Outlook

Short-term Trend: Largely stable with minor corrections; high-level consolidation and oscillation

Synthesizing the dynamics of cost, supply, and demand:

Cost Side: Propylene oxide prices have stabilized at elevated levels, continuing to provide a degree of support; consequently, there is no fundamental basis for a significant price decline.

Supply Side: Operating rates are recovering in the latter half of the month, leading to increased supply and alleviating the supply shortages observed earlier in the period.

Demand Side: Resistance to high prices persists, purchasing enthusiasm remains subdued, and there is a lack of momentum to drive further price increases.

Therefore, in the short term, the domestic propylene glycol market is expected to be characterized primarily by "broad stability with minor adjustments" and a "stalemate with sideways fluctuation." Prices are likely to fluctuate within a narrow range, making it difficult to reach new highs; furthermore, some high-priced inventory sources may see slight price concessions.

Key Variables to Watch

Raw Material Trends: The pace at which Propylene Oxide prices stabilize—along with price fluctuations in upstream Propylene and Crude Oil—directly determines the strength of cost support.

Supply Recovery Pace: The progress of plant restarts will further influence the supply-demand balance.

Shifting International Landscape: External factors—such as geopolitical dynamics in the Middle East—are being transmitted to the domestic market via energy supply chains.

Recovery in Downstream Demand: It remains necessary to monitor the duration of production cuts at downstream facilities, as well as when essential purchasing is expected to return to rational, incremental growth.

Summary

The propylene glycol market in March was the result of the combined influence of three factors: strong cost support, a supply situation that shifted from tight to loose, and weak downstream demand. During the early part of the month, driven by a surge in propylene oxide prices and tight supply, the market achieved significant gains. However, in the latter half of the month—as supply recovered and signs of sluggish demand emerged—the market transitioned from a phase of "unilateral upward movement" to one of "high-level fluctuation."

In the short term, propylene glycol prices are expected to maintain a pattern of general stability with minor fluctuations. Enterprises must closely monitor raw material costs, plant operating rates, and shifts in the international landscape; prudently manage inventory levels; and flexibly adjust their production and procurement strategies to mitigate the risks associated with price volatility.

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