China propylene oxide market moves in a relatively high price range in 2017, it experiences 4 rounds of ups and downs this year.
The first round of rise and fall takes place around the New Year festival. With the expectation of rising after the festival, downstream buyers increase their inventories ahead of it. As a result, the price is raised up before the coming of New Year, luring manufacturers into lifting operating load. During the festival, manufacturers keeps so many stocks, some large factories having about 9000-10000 ton storage, that they have to lower prices to address this problem. Due to the weak demands in downstream terminal facotires as well as the lack of followed-up new orders, the storage pressure is released in a sluggish manner, thus making the overal market tepid. When the PO price falls at RMB 9200/ton, downstream factories grasp the chance to supplyment the stock in a moderate way. Meanwhile,manufacturers have recovered from the storage trouble and intend to elevate the price. However, their intention is hindered by the inadequate rigid demand in polyols market and end up by another price reduction in a small margin.
March and April sees the second round of fluctuations. At the beginning of March, the market is all about the news that domestic factories are experiencing a large-scale environment inspection and Jilun Shenhua is to conduct maintenance. Hauted by panic buying climate, PO market hikes up. Restrained by the demands in downstream, most polyols can hardly go up but to squeeze between PO and downstream markets. In early April, the entire market can no longer withstand the pressure from polyols and downstream markets but to plunge. PO price follows the trend and is not stablized until polyols' bottom price of RMB 1400 holds back through sufficient orders.
The third round goes through August, during which the market is panic by the shortage of ethylene oxide and propylene oxide. Some ethylene oxide factories are undertaking overhaul and those who are not don't highlight ethylene oxide production. Under such circumstances of low PO inventories and national environmental inspection, manufacturers reduce the operating load. Prior to the peak season, the shortage of raw material urges the polyols traders and downstream buyers to purchase more, hence PO price rocketing up, with the highest range up to RMB500/ton within one day. With enough inventory, downstream factories give out less demands, allowing the price to fall from the zenith to a normal point.
October signifies the peak season coming. PO price goes because of the smooth delivery in the downstream along with the increasing rigid demands. The rise lasts for a month and recedes at the end of October. Here is the fourth round of up and down. However, the rigid demands in peak season are not affected by the falling but continue to facilitate the price rise. Until recently, with TDI going up, downstream market shows a weary profile and more participants wait and see how it goes.
In 2017, the average price of PO in Shandong is about RMB10500/ton, up 18% compared with RMB 8900/ton in 2016. Costs for PO raw material and production power stand at around RMB7500/ton and the gross profit(excluding raw material and workshop power, human, depreciation, sewage treatment and other costs) amounts to RMB 3000/ton, 2 times of that in 2016. The average 70-75% operating load indicates that PO market in 2017 has outerformed within the latest 5 year.
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