Propylene oxide Asia

Asia’s propylene oxide (PO) prices surged to the mid-to-high $1,700s/tonne CFR China in late February one the back of healthy demand and short regional supply.

The supply of PO tightened after two key PO plants in the Middle East and Thailand experienced mechanical issues in December 2012.

Spot PO prices hit a quarterly high of $1,800/tonne CFR China in early March on the back brisk replenishing activity among middlemen and end-users, as many expected demand to grow after the Lunar New Year holiday in China.

However, seasonal demand from March to May proved to be weaker than expected and spot PO prices began a gradual but continual downward slide.

Industry observers said buying interest from polyether polyols factories faltered as foam manufacturers faced a paucity of business orders from their downstream customers.

Demand from downstream bedding, furniture, construction and electrical appliance manufacturing industries were weak, because of uncertain macroeconomic conditions and restrictive government policies on China’s property sector.

There were also fears that PO prices had risen too high and too fast in the first quarter and were due for a downward correction. In April, PO spot prices dropped to a low of $1,500-1,530/tonne CFR China, as many factories in Asia still had adequate-to-high raw material PO stockpiles. Producers also reduced their plant operating rates to 30-40% capacity to counter the overall slow business conditions.

However, PO prices clawed back to price levels of above $1,550/tonne CFR China in early May, as underlying market fundamentals improved.

Updated to mid-May 2013