Urethane Blog

Chinese Propylene Oxide Review

January 25, 2023

2022 Year End Summary: China’s PO Market Review

PUdaily | Updated: January 17, 2023

The pandemic, coupled with tight global supplies of energy and food, impacted consumption and manufacturing activities in China in 2022. But China’s economy is expected to pick up in 2023 as the government efforts to stimulate economy are producing effects, including the shift in pandemic prevention and control policy, which enables the economy to emerge from the negative effects of the COVID-19, the demand to recover and the manufacturing activities to return to normal levels, as well as the development of policies to increase domestic demand, which will help offset the impact of decreased exports. And the low base in 2022 also lays a foundation for the robust economic recovery in 2023. It is expected that China’s economy will grow by over 5% in 2023.

In terms of the PU raw materials market, against the backdrop of global inflation, repeated COVID-19 outbreaks and start-up of new production capacities, in 2022 buyers gained more bargaining power the market supply and demand pattern has turned from up to down, and the PO market shows a trend of falling within a range and fluctuating in a narrow range.

China PO Prices

In 2022, manufacturers in Shandong continued to have the greatest impact on the changes in domestic PO prices. Offers in Shandong and North China averaged about CNY 10,163/tonne EXW in bulk in cash, down 38.3%. And those in East China averaged CNY 10,309/tonne DEL in bulk in cash, down 38.2%.

China PO Capacity & Output

In 2022, Taixing Yida Chemical saw successful trial run of its 150kt/a PO project, and Tianjin Bohai Chemical’s PO/SM plant, with an annual capacity of 200,000 tonnes for PO and 450,000 tons for SM, was also successfully commissioned, thus bringing the national PO capacity to 4.897 million tons per year, up 14% from prior year. Further capacity expansion can be expected as Zhejiang Petroleum and Chemical’s Phase II PO/SM project is under construction and Jiangsu Eastern Shenghong is planning its PO/SM facility project, with an annual capacity of 200,000 tonnes for PO and 450,000 tons for SM. China’s total PO output in 2022 hit a record high of 3.76 million tonnes, up 8.7 percent.

China PO Import & Export

According to the General Administration of Customs of China, China imported 290,000 tonnes of PO for the January-November period, down 26.3% year-on-year and mainly from Thailand and Japan. It exported 9,000 tonnes of PO for the same period, up 268.3% year-over-year and mainly to India and the United States.

In the year, some PO units in Saudi Arabia, Japan and South Korea, Thailand and European countries were shut for routine maintenance or forced to lower their production loads due to energy crisis and cost pressure. On the other hand, as domestic production capacity continued to expand, China’s dependence on imports had been significantly reduced. All this led to shrunk PO imports…

China PO Consumption

In 2022, China’s PO consumption rose by 4.2%.  Although PO production increased significantly as new capacities came online, the demand failed to expand as rapidly. The lockdown in East China was lifted in the second quarter, but no significant recovery in demand followed in July. The supply remained ample, though individual manufacturers experienced fluctuations in their production. In 2022, PPG remained the largest consumer of PO, although PPG consumption decreased by 8.3%. It is followed by PG/DMC, propylene glycol ethers, flame retardant TCPP and isopropanolamine…

In 2023, Tianjin No. 3 Petrochemical Plant, Zhejiang Petrochemical &Chemical, Shandong Minxiang Chemical Technology and Shandong Jufeng New Energy Technology are likely to put into operation their new plants. In 2022, PO manufacturers again lowered their production loads in an attempt to boost the market, resulting in an industry operating rate of 55% to 68% excluding plants shut for maintenance. But the effectiveness was quite different than in 2021. The main reason is the fierce competition resulting from more new players entering the market in addition to the sluggish demand. As supply became increasingly ample, buyers gained more bargaining power and the profit margin was squeezed.