The cyclopropane market is characterized by a tug-of-war between bullish and bearish factors, resulting in high-level consolidation.

Lead-in: Since September, the domestic propylene oxide (PO) market has exhibited a volatile upward trend. Intense fluctuations in crude oil prices drove significant increases in propylene prices at the beginning of the month, pulling PO prices higher. Subsequently, as cost-side pressures eased and growth stalled, tight supply-demand dynamics took the lead, pushing the market to new highs for the second half of the year. Recently, cost support has slightly diminished; suppliers face no inventory pressure, while downstream buyers remain cautious. Amidst these intersecting factors, the market is currently consolidating at high levels.

Supply: Incremental releases are slow; suppliers face no short-term pressure

Data source: Chempricehub

On the supply side, recent operational adjustments at plants have been relatively frequent. Binhua is operating at half load, while Satellite Chemical and Lianhong are running stably at full capacity. Qixiang is gradually restarting. Compared to the beginning of the month, units at Lianhong, Satellite, and Qixiang have released additional capacity. However, considering that most are in the initial startup phase or undergoing restarts, they are operating without significant inventory pressure, maintaining low stock levels. This week's production is estimated at 123,300 tons, with capacity utilization rising by 3.18 percentage points. With slow inventory accumulation among active producers, there remains some support for prices.

Next week, approaching the Mid-Autumn Festival holiday, it is expected that Qixiang will see slight volume increases, Binhua will return to normal operations, and South China may experience minor reductions, with other regions remaining stable. Overall commodity supply will increase moderately, suggesting that bullish sentiment may weaken slightly. Market participants will likely focus on pre-holiday inventory status.

Demand: Continued wait-and-see attitude; inventories remain low across the chain

On the demand side, downstream players previously held bearish sentiments. However, from July to September, the PO market primarily trended upward with prices consolidating at high levels. Coupled with monthly maintenance losses exceeding 200,000 tons on the PO supply side, downstream users have failed to effectively replenish stocks. Currently, both downstream processors and end-users are operating with low raw material inventories. Although acceptance of high PO prices is limited, rigid demand persists to maintain production.

Looking ahead, before the holiday, downstream views on crude oil volatility are diverging, but purchasing is largely driven by hard necessities. Limited pass-through of price hikes to end-products suppresses overall purchasing power. Despite some pre-holiday rigid demand, many buyers prefer to wait for potential lower prices before following up. Polyether prices have already seen some downward adjustments.

Cost: Profit margins turn positive; narrow rebound in raw materials boosts sentiment but impact is limited

The main raw material, propylene, saw prices retreat from the 10,000 RMB/ton high last weekend. Recently, despite a narrow rebound accompanied by crude oil fluctuations, the spread between PO and propylene has significantly recovered to the range of 2,000–2,500 RMB/ton. Consequently, profit margins for various PO processes have generally returned to positive territory. As of September 16, theoretical profits for representative processes—chlorohydrin and HPPO (Hydrogen Peroxide to Propylene Oxide)—were 649.7 RMB/ton and 110.2 RMB/ton, respectively. Cost support is weaker compared to earlier periods.

In the short term, international crude oil continues to strengthen, lifting cost-side support for propylene. Producers' inventories remain low, sustaining willingness to raise quotes. However, downstream enthusiasm for chasing highs has cooled, with significant premiums on actual transactions decreasing. High-priced goods face transaction pressure, limiting propylene's upside potential. Liquid chlorine prices have stabilized again after moderate adjustments. Unless cost-side factors experience a major surge, their impact will be primarily psychological, with supply-demand fundamentals retaining actual control over the market.

Outlook: Likely narrow fluctuations around stability before the holiday; watch plant operations during the break

In the short term, with PO prices consolidating at highs, cost factors are shifting slightly upward within a stable range. Supply increments are occurring but inventories remain controllable. Downstream participation is driven by passive fulfillment of rigid demand. With various factors intersecting and market sentiment showing divergence, prices are expected to remain mainly stable as the holiday approaches, though the possibility of modest discounts followed by rebounds cannot be ruled out.

During the upcoming National Day holiday, normal trading is expected in Northern China. Southern markets will likely see smooth deliveries based on pre-holiday orders. If there are partial operational adjustments at plants, volatile fluctuations may occur. Specific developments should be monitored closely.