Texas (USA): US propylene oxide (PO) prices fell in April after gaining strength in the first quarter of 2024 as the market lost momentum primarily due to rising crude prices triggered by tensions between Israel and Iran and persisting inflation in the US economy. Europe and Asia, on the other hand, are experiencing steady and stable prices with supply tightening due to downturns in China. Furthermore, the US Secretary of the Treasury’s visit to China and assertions of lower Chinese throughput in manufacturing have added woes to the Asian PO market as prices remain elevated in the Asia-Pacific region. ChemAnalyst’s forecast for PO over the next three months has been maintained owing to supply concerns and rising demand.

PO prices turned around in the USA in April after the first quarter. Reports from various sources and market trade flows reveal that suppliers failed to reach the accelerating price point they expected to achieve, leading to announcements of Force Majeure to control prices of PO globally. ChemAnalyst’s associates gathered from market participants in the US assert that propylene prices observed a turnaround in cost pressure in the latter half of the second quarter as natural gas and propane prices have remained historically low, indicating strong oversupply sentiments.

This situation worsened further when Europe’s demand for LNG slowed down due to high gas inventory levels until the end of March 2024. Contract negotiations for the next quarter deliveries of propylene to PO suppliers show significant discounts and call options being put forward by the suppliers. Market participants revealed that propylene volumes have remained significantly higher due to lower demand for PP exports to East Asia and Europe, estimated for the next quarter. This has led to significant downward revisions in spot prices for propylene, and suppliers are now turning towards the PO market to maintain prices.

LyondellBasell’s end to Force Majeure on PO supplies indicates that the company expects strong demand for propylene glycols and polyether polyols in the second as well as third quarters. US EIA pricing movements for propane for the month of April show significant declines in spot prices, from USD 0.834/gallon to USD 0.783/gallon recorded at Mont Belvieu, as inventories have continued to remain high and propylene markets are unwilling to produce more volumes.

This overcapacity has pushed down the PO value chain, with suppliers providing substantial discounts to PO and PG producers. Downstream polyether polyols demand has slowed down, with prices largely following propane pricing movements. The trend remains similar to European propylene oxide pricing movements, as a recently concluded PU conference asserted a "bearish" view in polyether polyols demand throughout Europe.

ChemAnalyst's forecast for PO in US and European markets has been maintained as bearish, with price recovery in the US expected to occur earlier than in European markets. ChemAnalyst’s researchers hold that Propylene oxide value chain movements are largely governed by demand side rather than raw material movements. Though PO contract prices have remained higher due to lower deflationary pressure it faces, due to end-use automotive and construction demand being lackluster due to high interest rates, the market equilibrium has limited the de-acceleration in PO prices as crude prices have previously touched USD 90/MT Brent basis. This situation is not expected to ease in the short term.