I. Cost Perspective: High-Level Pullback and Crude Oil Headwinds
This week, the domestic industrial-grade propylene glycol (PG) market exhibited a volatile trend characterized by an initial decline followed by stabilization and a minor rebound.
At the beginning of the week, raw material prices for propylene oxide (PO) remained firm at high levels. Consequently, PG market quotations maintained their previous highs. However, end-users strongly resisted these elevated prices, leading to sluggish transaction volumes. Domestic factory inventories gradually accumulated, creating mild inventory pressure. Suppliers’ determination to hold prices weakened, resulting in a stalemate where quoted prices existed but actual transactions were rare; negotiations primarily drove the limited deals that did occur. By mid-week, as PO prices dropped significantly, the center of gravity for PG prices fell rapidly. Following this substantial pullback, market sentiment shifted noticeably. Domestic downstream buyers entered the market on dips, while export orders with rigid demand were executed in concentrated batches. Many operating factories focused on fulfilling export deliveries, improving the sales atmosphere, with some even withholding inventory or halting quotes due to reluctance to sell at low prices. Recently, crude oil prices have continued to decline, fostering bearish sentiment in the market. Nevertheless, PG prices have touched bottom and stabilized, with quoted prices rising slightly within a narrow range. Downstream procurement remains focused on replenishing stocks based on immediate needs, and cautious sentiment among end-users has not fully dissipated. Market participants remain largely in wait-and-see mode, lacking sufficient momentum for significant price increases. Overall, the market is showing a slight upward trend with weak bullish force.
II. Demand Situation: Export Rigid Demand Provides Moderate Support
Regarding exports, China’s PG export volume in August stood at 40,640 tons, representing a month-on-month increase of 18.29% and a year-on-year increase of 44.81%. India was the largest destination country, receiving 6,251.158 tons. Cumulative exports from January to August 2026 reached 316,580 tons, up 59.62% year-on-year. With holidays approaching, pre-holiday export orders were released in concentrated batches, effectively consuming abundant domestic supply and significantly alleviating inventory and shipping pressures. This has helped maintain a healthy overall supply-demand balance in the industry. It is projected that September’s export volume will see steady growth compared to August.
On the domestic demand front, most downstream users followed up on lower prices but did not engage in large-scale stockpiling. Given the current market conditions for PG, domestic demand shows cautious sentiment regarding future trends, leaning slightly bearish. In the key downstream consumption regions of East and South China, traders report that downstream willingness to chase higher prices is mediocre, limiting the sustainability of demand and making it difficult to drive substantial price increases. Additionally, diethylene glycol (DEG), a primary substitute product for main downstream applications, saw its price drop rapidly below the concurrent PG price level. Consequently, many downstream users are adopting a wait-and-see approach, adjusting their strategies, and restocking at lower levels.
III. Co-product Situation: Accelerated Decline Disturbs Sentiment
Dimethyl carbonate (DMC), a co-product of the PO transesterification process, continued to decline in price this week. Meanwhile, PG benefited from strong export rigid demand and pre-holiday stockpiling support, facilitating smooth sales at low levels and resulting in good transaction performance. Influenced by this, most domestic transesterification plants prioritized PG orders to maintain normal production operations, offsetting the losses incurred from DMC. Simultaneously, operating factories adjusted PG quotes and shipping strategies within a narrow range based on real-time profit structures of co-products. Supported by PG’s rigid demand floor, they hedged against the negative impact of the DMC market. As a result, the PG market did not follow the continuous decline of co-products this week; instead, it stabilized at low levels, recovered slightly, and posted a minor gain. Overall, however, profits from the PO transesterification route have declined notably compared to earlier periods, with some factories planning maintenance shutdowns at the end of the month. Observing the markets for PG and its co-product DMC reveals a special pattern of divergence, with one rising and the other falling.
IV. Future Outlook
In the short term, before the upcoming "Double Festival" holidays, the PG market is expected to continue oscillating at low levels with limited volatility. However, the DMC market is likely to remain weak, which will continue to influence the operating rates of co-production units and the supply rhythm of the PG market. In the medium to long term, market participants generally hold a cautious attitude toward future trends, with uncertainties remaining. Continued attention should be paid to fluctuations in supply-side unit operations and guidance from raw material prices.
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