Propylene Oxide Prices Flat in August; Gradual Recovery Expected in H2 2024 in Europe

Propylene Oxide prices in Europe remained Flat due to weak propylene prices as well as plant outages throughout the month of August. The prices of Propylene Oxide have been trailing by a week for propylene and three weeks by Naphtha deliveries. Upstream markets have been gaining as Naphtha prices started their ascension in the middle of the week. Downstream Polyol markets have stabilized after four weeks of downward revision due to higher production output. As inventory levels have also surged, LYB announced maintenance at their cracker Units in Europe, to affect feedstock propylene production. End-use markets of construction and cosmetics have remained buoyant allowing moderate consumption with pace gradually improving as LYB in their Q3 guidance expects gains in volumes both YoY as well as QoQ basis. Prices of Propylene Oxide FOB Hamburg were assessed around USD 1470/MT in the week ending on 23rd August 2024.

Propylene Oxide supply in Europe remained stable in the first week while the feedstock for cracker LPG prices surged this week. Propylene to LPG spreads for European crackers currently remain unfavorable due to higher LPG costs and lower propylene prices. Outages at shell cracker at Moerdijk pulled up spot propylene prices almost immediately on 31st July 2024. The surge in prices is yet to affect Propylene Oxide sales although price revision upwards is quite possible as major suppliers have gone offline this week. Propylene Oxide prices continued to fall in the first week after month end adjustment made in contract prices for August deliveries. Downstream polyether polyol prices have remained stable with roll-over of prices as newer orders and their frequency have been relatively stable for the next two to three months largely driven by pending work completions in major economies. As more ships move towards Atlantic, production levels have been rising for August to cater for the export markets of Latin Americas and Europe. 

The prices of Propylene Oxide also dropped in the second week. Propylene Oxide value chain is seeing recovery in the prices of downstream polyols. However, the recovery is anticipated to be largely due to producers holding production and keeping their plants offline. Financial reports of Q1FY25 and their outlook by a European producer revealed significant challenges in automotive demand component manufacturing. This also now hit propylene glycol demand from semiconductor industries as automotive slowdown has hit semiconductor production, thus easing Propylene Oxide derived chemicals. The conversion of Propylene Oxide to polyols continues, however multiple plants in Germany as well as Netherlands have been facing technical challenges. The cosmetics and consumer bound demand remained strong which has been offsetting additional Propylene Oxide production to ease price decline.

The third and the fourth week saw stability in the prices. The downstream markets of propylene glycol saw bearish pricing due to higher supply and markets currently remaining severely overproducing partially due to European construction-based demand gradually improving in NW and Southern Europe for Unsaturated Polyesters due to peak construction output being observed in Italy, France and UK. Polyether Polyols, another derivative of Propylene Oxide in the downstream remained stable due to higher stocks and lower volumes coming online. Markets of PU in Europe have been seeing higher volume sales at the cost of lower pricing, Huntsman Q2 statements revealed. In the upstream, propylene prices have been surging partially due to high input cost of LPG for European crackers.

For the coming months of September and October, ChemAnalyst has forecast a modest recovery in Propylene Oxide prices due to active trading season and pre- fall stocking in Europe driven largely by improved consumer spending and lower credit costs.