Chinese Polyol Update
PUdaily, Shanghai—From early September, propylene oxide (PO) and polyether polyols market move up sharply on account of exuberant and warm terminal demand, as well as environmental inspections on all the chlorohydrin propylene oxide plants from Shandong Environmental Protection Office and safety check from State Administration of Work Safety. The growth of propylene oxide and flexible slabstock polyols prices are around RMB 4,200/ton and 5,250/ton from Sep. 1 to Oct. 8.
Nevertheless, propylene oxide and polyols market edge down and trading activities are limited after National Day because most small and medium scale sponge factories shut down their plants due to high price of TDI, leading to less buying interest of polyether polyols. As following chart shows, propylene oxide price in north China is around RMB 11,500/ton, in bank and DEL, and flexible slabstock polyols price in north China is around RMB 12,300/ton, in cash and DEL.
The reason why both propylene oxide and polyols prices inch down significantly is stagnant and weak demand from downstream users especially from sponge manufacturers, although domestic propylene oxide and polyether polyols plants’ operating ratios are not high. Bargaining power of sponge factories is weak among upholstered furniture industry value chain because concentration rate of both raw material industry and end industries is higher than sponge industry that leads to meager and scanty profitability of sponge industry.
It is heard from a principal of a small-scale sponge factory in east China that most small-scale sponge factories have to shut down or lower down operating rates due to cost pressure from increasing TDI price. Meanwhile, TDI supply is tight and some sponge factories cannot acquire enough TDI to produce flexible foam.
In short term, it is expected that the downward trend in propylene oxide and polyols market will carry on until the end of October and the cost of propylene oxide is around RMB 8,000-9,000/ton on Oct. 20, meaningthere is still about RMB 3,000/ton margin for propylene oxide manufacturers. However, some propylene oxide plants have already or plan to shut down at the second half of October and uncertainties of environmental and safety check may lead to tight supply of propylene oxide. So propylene oxide bottom price is around RNB 10,000/ton and polyols market will continue following the trend of propylene oxide market.
Editor: Andrew Na
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