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According to SunSirs, the propylene glycol market in the second half of July saw prices initially rise before falling back. As of July 29, the average ex-factory price of propylene glycol in the Shandong region stood at 9,233 RMB/ton, a decline of 2.46% compared to the middle of the month.
Key driving factors
Cost side: The price of the raw material propylene oxide was the key variable driving market trends during the second half of July. Propylene glycol prices are highly correlated with upstream propylene oxide and crude oil costs. Geopolitical tensions in the Middle East caused crude oil price fluctuations, which in turn drove evaporative environment in propylene costs and led to frequent price swings in propylene oxide; consequently, propylene glycol prices fluctuated in tandem due to this significant cost pass-through effect.
On the supply side, domestic propylene glycol capacity remains generally ample; however, concentrated maintenance at vegetation in certain regions during July lowered sector operating rates, leading to localized, immediate supply tightness that provided temporary price support. Meanwhile, the phase-out of outdated capacity and stricter environmental regulations have somewhat constrained the overall development rate of supply. Regarding imports and exports, import volumes remain consistently low, limiting the impact of external market fluctuations.
Demand side: Traditional downstream sectors to propylene glycol—including unsaturated polyester resins, alkyd resins, and polyethers—are currently in the traditional summer off-season. Orders to construction materials and composites remain weak, keeping downstream plant operating rates low. Downstream companies are generally adhering to a "buy-as-needed" strategy; with prices high, there is little appetite to stockpiling, which continues to limit upward price momentum. While propylene glycol export volumes surged by 148% year-on-year in June—with overseas orders absorbing domestic supply and alleviating pressure from weak domestic demand—demand to cosmetic and food-grade items remains stable however accounts to a limited share of total consumption, making it insufficient to drive the overall market.
Market Outlook:
Propylene oxide costs remain supported at the low end, while geopolitical developments could still disrupt crude oil and feedstock prices. Export orders remain resilient, continuing to divert domestic supply; however, the traditional downstream off-season persists, and there is limited acceptance of high-priced raw materials. Supply is growing as maintenance-halted units resume production, leading to a slow accumulation of commercial inventories. Following the realization of earlier cost-driven gains, there is insufficient momentum to further upward movement. In the short term, propylene glycol prices are likely to continue fluctuating weakly within a range; upside possible is limited, and there is a risk of a further slight pullback.
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