SunSirs: Rising Costs Drove Propylene Glycol Prices to Trend Upward Amidst Fluctuations

According to SunSirs, the propylene glycol market in the first half of July experienced an initial dip followed by a rebound, characterized by a narrow upward fluctuation. As of July 15, the average ex-factory price of propylene glycol in the Shandong region stood at 9,466 RMB/ton, marking a 4.8% increase from the beginning of the month.

Key Drivers

Costs: From a drag to a powerful upward driver

The key variable driving market trends during the first half of the month was the feedstock propylene oxide. In the early part of the month, propylene oxide prices continued to weaken, resulting in insufficient cost support and putting downward pressure on propylene glycol prices. By mid-month, however, escalating geopolitical tensions in the Middle East caused international oil prices to surge; propylene oxide prices followed suit with a sharp rise, climbing more than 10% from the beginning of the month. This strong reversal in costs directly drove an accelerated rise in propylene glycol prices during the middle of the month.

Supply: Maintenance-driven support and low spot inventory

In early July, the capacity utilization rate for propylene glycol hovered around 50% before dropping further to 47% by mid-month, keeping overall supply levels low. Tight spot market liquidity and low commercial inventory levels provided a floor for market prices. Driven by the supply contraction, expectations of shortages intensified slightly, boosting downstream willingness to restock at lower price points and effectively halting the previous trend of continuous price declines. From mid-July onwards, units that had undergone maintenance successively resumed production; industry operating rates gradually recovered, and the incremental supply was released slowly, easing the previously tight spot market conditions.

Demand: Seasonal Off-Season Limited the Extent of the Rebound

July marks the traditional off-season for the downstream resin industry; capacity utilization at unsaturated resin plants stands at only 33%, and the polyether spot market remains sluggish. Domestic trade is driven primarily by essential restocking needs, while support from export orders is modest. Even during the price rally following July 13, downstream buyers have remained resistant to high prices and cautious about chasing the market upward, focusing instead on working through existing inventories and fulfilling contract obligations.

Market Outlook

The propylene glycol market is characterized by a clear tug-of-war between cost support and weak supply-demand dynamics, with the market lacking momentum for a sustained directional move. In late July, the market is expected to see narrow-range fluctuations and a slowdown in upward momentum; overall upside potential is limited, and the possibility of a minor pullback cannot be ruled out.

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