SunSirs: Propylene Oxide: Tight Supply-Demand Balance Supports Prices at High Levels

The propylene oxide market is characterized by contracting supply, strong cost support and prices fluctuating at high levels. With the global capacity landscape undergoing restructuring, the domestic supply-demand balance remains tight, and export structures are being adjusted; prices are holding firm amidst the interplay between supply and demand.

I. Export Data: Year-on-Year Decline in Industry Exports, Contraction in Overseas Demand

Customs data indicates that exports of products related to the propylene oxide industry chain declined overall year-on-year from January to March 2026. Specifically, cumulative exports of propylene oxide from January to February totaled 0.0054 million tons, a year-on-year decrease of 82.5%, with exports primarily destined for Cambodia, Thailand and the United Arab Emirates. As a key derivative, exports of epichlorohydrin in the first quarter stood at 4,241.92 tons, a year-on-year decrease of 69.37%, primarily due to increased self-sufficiency rates at overseas facilities and reduced reliance on Chinese supplies. In March 2026, China imported 17,900 tons of propylene oxide, a year-on-year increase of 19.7%; China exported 200 tons of propylene oxide, a year-on-year decrease of 94.4%

II. Production Capacity Since April: Maintenance and Capacity Replacement Proceed in Parallel, with Limited Supply Increases

Since April, domestic propylene oxide production capacity has been characterized by “maintenance disruptions, new capacity replacement, and steady overall growth”. Total domestic capacity stands at approximately 10.4 million tons per annum. In early April, several major plants underwent maintenance and reduced output, with the industry’s operating rate remaining at a low of 75–80%, resulting in a contraction of effective supply. Whilst some plants operated at high capacity, the pace of new capacity coming online slowed. Environmental policies have accelerated the phase-out of outdated chlorohydrin-based capacity, whilst the share of green processes such as the HPPO method has increased, leading to continuous optimisation of the capacity structure. Overseas, accidents at key US facilities led to temporary production disruptions, whilst soaring energy costs in Europe prompted the shutdown of multiple plants. This widened the global supply gap, with domestic import volumes declining year-on-year, further tightening domestic supply.

III. Price Trends: Volatile Uptrend Reaches Annual High, with Increased Volatility

Propylene oxide prices have generally trended upwards in 2026, with a cumulative increase of over 20% year-to-date. Prices continued to strengthen in April, rising by 8% from the beginning to the end of the month, driven by a tight supply-demand balance.

On 8 May, the SunSirs propylene oxide benchmark price reached 10,633.33 RMB/ton, up 3.57% from early May.

The core drivers of price volatility were supply contraction and cost support: plant maintenance reduced spot market supply, whilst high propylene prices pushed up production costs. Traders were strongly committed to maintaining prices, and price elasticity was fully realized.

IV. Global Supply Landscape: Contraction in Europe and the US, Asian Dominance, and the Reshaping of the Global Landscape

The global propylene oxide supply landscape is characterized by “contraction in Europe and the US, Asian dominance, and the rise of China”. In Europe, soaring energy costs have led to the shutdown of over 800,000 tons of capacity in recent years, resulting in a 15% contraction in supply; North American capacity remains relatively stable, but frequent incidents have intensified supply disruptions. Asia has become the core of global supply, with China’s capacity accounting for over 40% of the global total. Japan, South Korea and Thailand are traditional suppliers, but ageing facilities and low operating rates have led to a year-on-year decline in export volumes. Global supply concentration is declining, and China, leveraging low-cost processes and capacity expansion, is gradually filling the gap left by Europe and the US, with its export share expected to rise.

V. Upstream and Downstream Prices: Strong Raw Material Prices Support Costs, Smooth Downstream Price Pass-Through

Upstream propylene prices remained at high levels, with the average price reaching 8,300 yuan per ton in early May, a 15% year-on-year increase. As propylene accounts for 65%–85% of propylene oxide production costs, cost support remains robust. Prices for auxiliary materials such as hydrogen peroxide and liquid chlorine have remained stable, further solidifying the cost floor. In the downstream sector, polyether polyols account for 70% of propylene oxide demand; used in the production of polyurethane flexible foam, they are widely applied in furniture, automotive and construction sectors, with prices rising in tandem with propylene oxide.

VI. Future Outlook: Tight Supply-Demand Balance to Persist, Prices to Fluctuate at High Levels

Looking ahead, the tight supply-demand balance in the propylene oxide market is unlikely to be disrupted in 2026. Prices are expected to fluctuate at high levels, with the central price steadily rising. On the supply side, domestic plant maintenance has become routine, outdated capacity continues to be phased out, and the release of new capacity is limited; overseas supply is contracting, with little prospect of increased imports, resulting in an overall tight supply situation. On the demand side, domestic demand for polyurethane flexible foam remains stable, whilst the furniture and automotive sectors are recovering steadily; overseas demand remains resilient, and the optimization of the export structure is supporting stronger prices.

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