European Propylene Oxide (PO) Prices Continue to Decline in October Amid Market Volatility

Propylene Oxide (PO) prices maintained their downward trajectory into the third week of October 2024, reflecting sustained market weakness. However, volume growth recorded in Q3 has extended into October, driven by delayed rainfall and higher-than-usual temperatures, which bolstered demand for PO and its derivatives across European markets. In the latest market assessment for the week ending October 18, spot prices of PO fell by 1%.

INEOS, in its Q3 2024 trading statement, reported that demand for oxide products, particularly PO, remained resilient in Europe due to industrial supply constraints experienced earlier in the year. ChemAnalyst’s analysis reveals that propylene glycol (PG), a key downstream derivative of PO, has faced significant price reductions since April 2024. PG margins over PO turned low during Q3, driven by reduced unsaturated polyester production and weakened demand in Europe. 

On the supply side, PO margins over propylene feedstock narrowed during Q3, reflecting tighter market conditions. These supply constraints were a critical factor, as evidenced by persistent shortages in the European market. However, freight costs eased significantly, dropping from USD 7,500/FEU earlier in the year to USD 3,700/FEU for APAC-Europe shipments by Q3. 

According to market participants, this year’s peak season began earlier than usual, with heightened activity recorded in July and August, coinciding with the start of Q3. On the demand side, unsaturated polyester prices have stabilized, while PO derivative sales to the cosmetics and pharmaceutical sectors remain below pre-pandemic consumption levels. Export data shows flat year-over-year (YoY) PO export volumes from Europe, while prices are now 3% lower than in 2023, driven by easing natural gas prices, which were a major cost driver in previous years.

In the USA, PO production declined in Q3 due to operational disruptions at INEOS’s Louisiana site and other facilities in Texas, leading to lower sales volumes and reduced revenue. However, PO margins over propylene feedstock improved, supported by stable domestic demand and favorable feedstock availability. 

In contrast, PG margins over PO declined at a sharper rate in the USA compared to Europe. This decline is attributed to reduced demand for unsaturated polyester resins, as Q3 manufacturing activity in the US slowed, resulting in higher inventories and minimal restocking.

Looking ahead, PO prices are expected to remain subdued through October. However, forecasts indicate a potential price recovery by the end of Q4, driven by winter stocking demand and increased consumption of PO derivatives in the cosmetics and pharmaceutical sectors. Additionally, efforts to recover lost production volumes, coupled with delayed deliveries following the peak hurricane season, are expected to support market stability and higher consumption through the final quarter of 2024.