Market Logic:

① The cost side saw a strong upward trend for propylene and a decline for liquid chlorine, providing gradually stronger support. The representative process continued to incur losses, with average profitability slightly recovering.

② On the supply side, Lianhong's unit underwent maintenance shutdown, while Binhua and Sanyue continued to reduce loads, and Wanhua had a slight reduction in output. Operating rates are assessed to have declined.

③ Downstream demand followed somewhat passively, anticipating price increases would be difficult, leading to staggered purchases. However, caution increased after recent high prices, and the pace of buying gradually slowed.

The price of propylene oxide rose by 20% from July 9 to July 16, primarily driven by a broad rise in costs, supplemented by supply-demand fundamentals.

 Supply & Demand: Weekly Supply-Demand Balance Analysis and Trend Forecast for PO

The supply-demand balance for the current period shows a pattern where supply was less than demand. Both supply and downstream demand contracted, with the supply contraction being larger than that of demand. The supply-demand balance differential is expected to continue narrowing and remain negative in the next period, which is likely a bullish factor for prices. However, actual downstream follow-up may depend on timing, and specific supply-demand fluctuations will require monitoring for realization.

This period, Lianhong's plant underwent maintenance shutdown, Binhua and Sanyue continued to reduce loads, and Wanhua had a slight reduction in output. No import shipments were heard, and supply was assessed to have declined. Among downstream consumption, polyether and propylene glycol production showed one increase and one decrease. The overall supply-demand gap narrowed, providing some bullish support, and prices moved up strongly. The supply-demand balance for this cycle was largely in line with previous expectations. Besides supply and demand, significant fluctuations on the raw material side also had a major impact.

For the next period forecast, production is expected to continue decreasing, with no import shipments heard. Total supply is expected to decline. Consumption demand may see a slight increase. Polyether production is forecast to remain largely stable, while propylene glycol production may increase due to a restart of a previously shut-down unit. The theoretical supply-demand gap is expected to continue narrowing, which is likely to have a bullish impact on market prices. Actual consumption and operating rates will depend on realization and market sentiment influenced by news and guidance.

In the next period, considering recent maintenance and restart activities, PO is expected to continue contracting, polyether may see a slight increase, PG may increase due to the restart of a previously shut-down unit, and PM rates are expected to remain stable.

Key points to watch:

Supply Side: No immediate increase in supply is expected. Although propylene prices are forecast to fall, the loss-making status is unlikely to change. Suppliers with relatively low pressure may moderately narrow the price decline.

Demand Side: Downstream demand currently has low acceptance of PO prices and expects weakening raw material support, mostly intending to wait for lower prices before following up.

Cost Support: External factors influence raw material prices and market sentiment. Cost-side impact has deepened recently. Crude oil and propylene trends influence market sentiment.