Propylene Oxide Prices Show Modest Recovery in Late July, Weakness Still Persists

Propylene Oxide prices show modest recovery in the third week of July while the overall sentiment cumulatively remained bearish in Europe throughout the month. This is reflected in the flash PMI recording a drop of 0.8 points in July over June values. The drop was more prominent for manufacturing sector.  Moreover, the major price fluctuations throughout the spot markets for Propylene Oxide reflected a general movement along the upstream propylene prices. The propylene prices remained subdued and fell from CIF Germany USD 989/MT to USD 979/MT in the given month amidst weakness in European markets and high stocks availability. Propylene Oxide downstream Polyether Polyols prices continue to follow bearish trend. However, the upstream propylene prices began their recovery in the third week as newer quotations for Germany bound deliveries from US or Saudi showed upward price movements. Propylene Oxide prices henceforth were revised upwards indicating higher propylene conversion to Propylene Oxide derivatives continues in Europe, especially PU.

Propylene Oxide prices in Europe declined continuously for the first to weeks in Europe with cumulative weakening of 3.4%, according to ChemAnalyst on 12th July 2024. This is inline with upstream propylene deliveries quoted to EU bound supply at CIF Germany falling by 1%. The fall in prices was largely for Propylene, as US Energy administration revealed was easing of propane and crude prices in the midst of the month. The downstream prices of Propylene Oxide derived polyols fell 8% throughout the week as overproduction, weaker upstream prices and lower downstream demand. Eurozone manufacturing continued to decline in July. Factories reduced purchases and stockpiles of both raw materials and finished products. Supplier delivery times improved slightly, but at the slowest pace in recent months. Job losses in the manufacturing sector also persisted, according to PMI report. While investigating further, prices of Propylene Oxide in the markets have been largely easing as Eurozone saw rise in mortgage rates as banks have been observing higher NPA and industrial distress throughout Europe. LyondellBasell, one of the largest producers of Propylene Oxide, has been in talks of selling the European assets, remained the latest conglomerate to finance their high value operations through these challenges. European Propylene Oxide demand currently is weak amidst high carbon prices. ChemAnalyst assessed that Propylene Oxide producers have been facing high challenges along with cracker operators and downstream polymer manufacturers to reduce emissions and transition to greener sources, However, while assessing the carbon prices when the manufacturing picked in Europe in May and early June, Carbon prices hit as high as EUR 75.6/ton, limiting Propylene Oxide and other polymer production downwards. Hence consumption eased for Propylene Oxide and its downstream since June 2024. However, high propylene and carbon prices in Europe pulled up the spot prices offered for Propylene Oxide in the second week of July in FD zone.

Propylene Oxide prices are expected to surge in the coming months and are expected to rise due to propylene prices. CIF deliveries to get costlier in Europe which in-turn to keep the propylene oxide prices higher. However, easing of downstream production of Polyether polyols to offset gains partially, nevertheless ChemAnalyst expects a moderate price.