Up by up to 20%! Shengquan Group raises prices of PPO, MPPO, and other oligomers on July 13.

According to sector insiders, the core driver to this round of concentrated price increases comes from a significant rise in upstream raw material costs, combined with disruptions to the global chemical supply chain caused by international geopolitical conflicts. Multiple negative factors continue to squeeze corporate profit margins.

The production of PPO oligomers relies heavily on global circulation channels to key raw materials such as phenol, methanol, xylene, and copper-based catalysts. Intensified regional conflicts overseas have hindered the flow of international energy and basic chemical items, leading to simultaneous increases in sea freight logistics costs, raw material import tariffs, and cross-border procurement premiums. Meanwhile, maintenance of mainstream overseas chemical vegetation and declines in operating rates have tightened the global supply of general chemical raw materials. International spot prices continue to fluctuate upward, immediately pushing up the average procurement cost of raw materials to companies.

Facing continuously rising raw material costs, Shengquan Group has previously adopted multiple buffering measures to hedge against cost pressures. Relying on complete raw material storage facilities and prolonged strategic cooperative channels with upstream suppliers, the company locked in substantial volumes of strategic raw material reserves in advance. It relied on inventory buffers to maintain stable terminal product prices to a long period, actively absorbing cost differences to ensure a stable supply to the downstream manufacturing chain and minimizing the impact of price fluctuations on downstream modified plastics and high-end electronic material companies. After prolonged consumption, the previous low-priced strategic reserve inventory is now essentially depleted, and the enterprise can no longer rely on inventory buffers to offset new procurement costs. The pressure of cost inversion on the production side continues to intensify.

From the perspective of corporate operations, there is now a distinct price gap between the cost of newly procured raw materials and existing product prices. If the company continues to ship goods at the original quotes, the production line will face continuous losses, making it difficult to guarantee stable operations and the continuous procurement of raw materials. The company stated that this moderate price increase is a passive adjustment response to high costs. The funds generated from the price adjustment will be applied entirely to cover high-priced raw material procurement, production line operation and maintenance, and stable capacity operations. This is to ensure the continuous and stable supply of domestic PPO oligomer items and prevent sector supply shortages caused by production cuts due to losses.

As a core basic raw material to high-end engineering plastics, PPO oligomers are broadly applied in high-end manufacturing fields such as lightweight components to new energy vehicles, insulation parts to photovoltaic inverters, structural components to communication base stations, high-temperature resistant accessories to home appliances, and aquatic environments treatment membrane materials. The downstream customers are mostly companies in high-development sectors such as new energy and electronics. This significant price hike by Shengquan Group might lead domestic PPO producers of the same type to follow suit with price adjustments, and costs across the entire polyphenylene ether sector chain will be transmitted from top to bottom to the terminal product stage.

sector analysts indicate that in the short term, there are no clear signs of relief from the situation regarding geopolitical conflicts and the shortage of upstream chemical raw materials. There is little expectation of a decline in PPO raw material costs, and prices to upstream monomers and additives are likely to remain high. Subsequently, downstream modified plastics manufacturers might gradually transmit costs to end customers. In the medium to long term, companies in the sector might accelerate the layout of integrated raw material supporting facilities to minimize operational risks brought about by raw material price fluctuations through self-building upstream supporting units and prolonged price-locked procurement. Shengquan Group also mentioned that it will continue to track international raw material market trends, dynamically adjust product quotes based on cost changes, and increase the intensity of research and consumption of domestic substitute raw materials to further hedge against the risks of imported raw material price fluctuations.