FocusChina domestic PO market to soften as demand turns weak

26 November 2012 07:40  [Source: ICIS news]

By Viola Pan

PO is the feedstock for polyether polyols that go into polyurethanes (PUs), which can be used as thermal insulation material for walls – demand for which is usually tied with construction activities.SINGAPORE (ICIS)--Domestic spot prices of propylene oxide (PO) in China may fall for the rest of the year as demand typically weakens at the onset of the winter season, leading to an oversupply of the material, industry sources said on Monday.

PO was assessed at yuan (CNY) 11,400-11,600/tonne ($1,830-1,862/tonne) DEL (delivered) in east China on 23 November, down by CNY200-250/tonne from the start of the month, according to Chemease, an ICIS service in China.

PO is the feedstock for polyether polyols that go into polyurethanes (PUs), which can be used as thermal insulation material for walls – demand for which is usually tied with construction activities.

Construction usually slows down towards the end of the year because of extreme cold weather, which lasts up to February in China.

Demand for raw material is waning as downstream polyether polyolds facilities also currently running at reduced rates of about 70% as producers deal with weak sales and inventory pressure, industry sources said.

Taking into account the weakness in demand, some polyether polyols makers have lowered their offers and this further weighed on the Chinese PO market, they said.

Offers for polyether polyols in east China are being quoted at CNY12,300-12,400/tonne, down by CNY500-650 from the start of the month, market sources said.

For the most part of November, supply and demand for PO had been relatively balanced, allowing prices to fluctuate at a narrow range of between CNY11,400-11,600/tonne, traders said.

PO facilities in China are currently running at about 90% of capacity, industry sources said.

Major PO producer Wudi Xinyue Chemical Co has ramped up production in November, raising the run rate at its plants at Binzhou in Shandong province to 85% from 61% in the previous month,  a company source said.

The company has a total PO capacity of 300,000 tonnes/year. It switched to producing PO at one of its epichlorohydrin (ECH)/PO swing plants in view of the poor ECH market, the source said.

Meanwhile, another key Chinese producer, the Befar Group, is currently running its PO plants with a total capacity of 195,000 tonnes/year at Binzhou city at full capacity.

PO makers may consider cutting production if market conditions deteriorated further, market sources said.

($1 = CNY6.23)

Additional reporting by Vikki Shen

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Viola Pan
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