Introduction: From January to May 2026, the average gross profit margin for the domestic glycerin-based epichlorohydrin industry was -473 RMB/ton, representing an 8.51% increase compared to the same period last year. In the first quarter, driven by geopolitical conflicts in the Middle East, the overall chemical market experienced severe volatility, with epichlorohydrin also showing wide fluctuations. During this period, prices of upstream raw materials such as glycerin and propylene rose simultaneously, coupled with a broad uptick in downstream epoxy resins. Multiple bullish factors propelled epichlorohydrin prices to surge rapidly. On March 9, the Jiangsu market saw a single-day increase of 700 RMB/ton, with prices reaching 14,200 RMB/ton (consignment delivered), marking a recent high. During this phase, epichlorohydrin prices rose in tandem with raw material costs, narrowing the industry's loss margin. Entering the second quarter, due to the pullback from earlier highs, poor cost pass-through, and persistent weak demand, market prices continued to decline, further exacerbating industry losses.

1. Multiple bearish factors including cost, supply, and demand intensify market competition

From January to May 2026, domestic epichlorohydrin prices showed a trend of first rising and then falling, with an average price of 12,734 RMB/ton, up 36.51% year-on-year. The highest price was 14,250 RMB/ton on March 10, and the lowest was 10,750 RMB/ton at the end of May, with an amplitude of 29.85%.

The price rise in mid-March was mainly due to geopolitical conflicts in the Middle East, which intensified fluctuations in international oil prices, driving many chain product prices through a "roller coaster" pattern. High glycerin prices, combined with a broad rise in downstream epoxy resins and related product BPA, jointly pushed epichlorohydrin prices higher. On March 11, Jiangsu market prices were pushed up to 14,250 RMB/ton, up 1,500 RMB/ton or 11.76% from early March. As prices climbed to high levels, downstream acceptance of high-cost raw materials gradually declined. With poor cost pass-through, demand could not increase, creating constraints on further epichlorohydrin price increases and sending prices into a downward channel. By the end of May, prices fell to 10,750 RMB/ton, down 2,400 RMB/ton or 18.25% from early May.

2. Sustained price decline further pressures profitability across different processes

In January-February 2026, prices of epichlorohydrin raw materials and key downstream products showed a narrow oscillating uptrend. However, from March, as geopolitical conflict news in the Middle East continued to ferment, propylene, glycerin, epoxy resins, and bisphenol A all experienced rapid and broad increases. Driven by this, epichlorohydrin prices surged to a high of 14,000 RMB/ton (consignment delivered) on March 11. With raw materials and epichlorohydrin prices rising simultaneously, the average theoretical profit margins for different processes in the first quarter were in recovery. The average profit for the propylene-based method was 4,787 RMB/ton, up 0.46% quarter-on-quarter; the average profit for the glycerin-based method was -281 RMB/ton, up 44.02% quarter-on-quarter. However, after prices reached high levels, profit-taking entities shipped heavily, causing epichlorohydrin chain product prices to swiftly turn from rising to falling and remain in a downward channel. This continued to narrow the theoretical profit margins of different processes. In April and May, the average profit for the propylene-based method compressed to 2,992 RMB/ton, down 37.5% from the first quarter; the average profit for the glycerin-based method was -755 RMB/ton, down 168.68% from the first quarter. Although the average theoretical profit margins of the two mainstream production processes were further squeezed, the differences between them remained significant.

3. Under dual pressure from price and profit, epichlorohydrin sees increased interim shutdowns

In May 2026, due to a bearish market outlook after the May Day holiday and sustained losses in the glycerin-based process, plants including Shandong Minji, Hebei Zhuotai, Jiangsu Haixing, and Zhejiang Zhenyang successively shut down for maintenance, while some units reduced operating rates. Estimated epichlorohydrin production from January to May 2026 was about 600,000 tons, up approximately 11% quarter-on-quarter. Production in May reached 114,800 tons, a decrease of 6,600 tons or 5.44% from April, and a year-on-year decrease of 1.26%. Capacity utilization was 48.69%, down 3.45 percentage points from the previous period and 4.52 percentage points lower than the same period last year. Looking ahead, as losses in the glycerin-based process widen further, more plants are expected to reduce loads or shut down. Shandong Binhua's 75,000-ton/year unit plans to shut down for maintenance in early June, expected to last about half a month; Fengyi Oils & Fats also has a shutdown plan, which requires further follow-up. Meanwhile, Jiangsu Haixing and Inner Mongolia Pangu units are gradually restarting, which may increase the overall epichlorohydrin supply in the market.

4. Driven by cost and supply-demand dynamics, profits are expected to gradually recover

In June, the price of the main raw material glycerin is expected to continue its downward trend, further alleviating epichlorohydrin cost pressure. However, after the recent downstream restocking for immediate needs, enterprises are primarily fulfilling orders. With no immediate supply pressure, the intention to stabilize prices is relatively evident, and there is even a tentative push for price increases. Therefore, theoretical profit margins for different epichlorohydrin processes are expected to improve, but attention still needs to be paid to raw material changes and downstream demand dynamics.