Introduction: Since the end of May, the domestic propylene oxide (PO) market has been operating with weak supply and demand. Prices have continuously fallen, breaking through the 9,000 RMB/ton (Shandong, cash, ex-factory) threshold, once again showing a price inversion between PO and propylene. Recently, some suppliers have implemented limited sales or reduced operating rates, signaling an intention to stabilize prices and promote a recovery. This has modestly boosted market sentiment, with a slight uptick on June 3. However, amid the off-season for downstream products and a lack of significant positive support, the upward potential appears limited for now.

Supply: Fluctuations moderate; watch for temporary capacity reductions

Table 1: Domestic Propylene Oxide Daily Output and Capacity Utilization Comparison

| Item | May 27 | June 3 | Difference | Change |
| :--- | :--- | :--- | :--- | :--- |
| Daily Output (10,000 tons) | 1.56 | 1.61 | 0.05 | 3.21% |
| Daily Capacity Utilization Rate | 58.53% | 60.34% | 1.81% | - |

Source: chempricehub

On the supply side, after a series of plant maintenance shutdowns in mid-to-late May, the frequency of unit startups and shutdowns has recently decreased, with some producers mainly making minor adjustments to operating rates. As of June 3, domestic PO daily output reached 16,100 tons, an increase of 500 tons from May 27, and capacity utilization rose by 1.81 percentage points to 60.34%.

Looking at the mid-to-late period of the month, Huatai's 80,000-ton chlorohydrin process unit and Hangjin's 120,000-ton chlorohydrin main unit are scheduled for annual maintenance, expected to last 7-15 days. Wanhua's Phase IV 600,000-ton CHP unit may restart. Currently, due to the PO-propylene price inversion, some units continue to operate at reduced rates. However, considering that some already shut-down units still hold significant inventory which may be sold opportunistically later, preliminary estimates for June production are around 526,000 tons, with a capacity utilization rate of 65.82%. This represents a 1.9 percentage point increase from May. Barring additional unplanned output reductions, positive support is limited.

Demand: Downstream off-season; periodic short-term follow-ups

Figure: 2025-2026 Weekly Capacity Utilization Trends for Domestic Propylene Oxide and Key Downstream Products (%)

• Figure content |
  | Source: chempricehub

On the demand side, recent data for both domestic and foreign trade has declined. The terminal automotive sector has also shown reduced volumes. Overall transmission is relatively slow. Coupled with the off-season, general sentiment is mediocre. The polyether sector continues to operate under an inversion with PO. After some modest order intake at the week's low point, the feedback effect from the slight recovery in PO prices has been limited.

The competitive landscape downstream persists. Under the inversion scenario, overall operating rates are slightly lower. Moreover, as mid-year approaches, companies generally aim to control inventory levels, mainly following up on just-in-time demand. Subsequently, the sustainability of new orders is expected to be average, potentially constraining the upside for PO. For propylene glycol, Jiangning and Tongling units may restart in the latter half of the month. Also, monitor the progress of Depu's new unit, which could bring a small amount of additional supply.

Costs: PO-propylene inversion persists; cost pressures remain

Table 2: Comparison of Domestic Propylene Oxide, Main Raw Materials, and Representative Process Costs/Profits

| Item | May 27 | June 3 | Difference | Change |
| :--- | :--- | :--- | :--- | :--- |
| PO (Shandong) | 9600 | 8900 | -700.00 | -7% |
| Propylene (Shandong) | 9025 | 9000 | -25.00 | 0% |
| Liquid Chlorine (Shandong) | 225 | 200 | -25.00 | -11% |
| Chlorohydrin Theoretical Cost | 10628.75 | 10573 | -55.75 | -1% |
| Chlorohydrin Theoretical Profit | -1028.75 | -1673 | -644.25 | 63% |
| HPPO Theoretical Cost | 11277.5 | 11258 | -19.50 | 0% |
| HPPO Theoretical Profit | -1677.5 | -2358 | -680.5 | 41% |

Source: chempricehub

Figure: 2025-2026 Comparison of Theoretical Profits for Representative Domestic Propylene Oxide Processes (RMB/ton)

• Figure content |
• Source: chempricehub

PO prices are currently operating in a relatively low range. Propylene prices, supported by crude oil and polypropylene (PP), remain at relatively high levels. The PO-propylene price inversion has reappeared this week. As of June 3, the PO-propylene spread stood at -100 RMB/ton. Losses for representative processes have deepened compared to the previous week, and plants are generally under cost pressure.

For June, propylene is expected to run narrowly and weakly, but influenced by crude oil fluctuations, the overall range is likely to remain on the high side. It will be difficult to change the loss-making status of various PO processes in the short term. The PO-propylene spread is not expected to widen significantly. Costs will provide some support for the market floor. Meanwhile, monitor whether sustained losses trigger any temporary capacity adjustments.

Outlook: Limited upside for narrow gains; consolidation expected for now

In the short term, the PO market sees a slight rebound. However, the persistent inversion between polyether and PO on the demand side suggests limited sustainability, likely constraining the overall upside. The market may see a slight further uptick before stabilizing again for digestion. Prices are expected to hover around the 9,000 RMB/ton (Shandong, cash, ex-factory) level.

In the medium to long term, the hot weather off-season in June and July, coupled with limited planned maintenance on the supply side, suggests the market will likely remain relatively loose in terms of supply and demand. A significant improvement in market conditions is difficult to foresee. Downside is cushioned by costs, upside is capped by demand. The market is currently expected to revert to a narrow range-bound consolidation pattern. Focus on upstream and downstream unit fluctuations.