Spot orders surged amid export tax rebates, driving up propylene oxide prices.

On February 6, the propylene oxide sector saw another rally, with Meibang Technology (920471.BJ) leading the charge with a peak gain of over 14%. Other companies including Shida Shenghua (603026.SH), Wanhua Chemical (600309.SH), Hongbaoli (002165.SZ), Satellite Chemical (002648.SZ), and Qixiang Tengda (002408.SZ) also followed suit.

Since January this year, the propylene oxide sector has witnessed a remarkable surge. Tonghuashun data shows the sector index climbed from 1,447.53 points on January 5 to 1,783 points by January 30, hitting its highest level since September 2022. Market reports indicate that spot prices for propylene oxide in January continued to rise, reaching a two-year high.

A Red宝丽 board secretary's office staff member told China Times that propylene oxide prices have remained low for years, with a price increase only beginning in Q4 2025. The January price surge this year was particularly notable. While short-term price fluctuations may be influenced by speculative factors, the long-term trend will ultimately depend on supply-demand dynamics.

In January this year, shares of listed companies related to propylene oxide surged significantly. Among them, Meibang Technology rose 67.45% in the month, Hongbaoli gained 68.92%, Hongqiang Shares climbed 43.41%, Satellite Chemicals increased 37.78%, and Yida Shares also rose 37.78%.

Business Society data shows that the benchmark price of propylene oxide reached 8,200.00 yuan per ton on January 30, marking a 6.03% increase from the beginning of the month. The price surged nearly 10% at certain times during the month, hitting a two-year high. This has driven up demand, with many chemical companies already fully booked for propylene oxide-related products, and production schedules extending well into February.

The price surge of epoxy propane stems primarily from shifts in industry supply-demand dynamics. Feng Na, an epoxy propane analyst at Zhuochuang Information, explained to reporters that post-New Year's Day, operating rates at some northern production facilities declined. With downstream facilities poised to resume operations, companies scaled back shipments accordingly. Meanwhile, optimistic market expectations drove downstream firms to actively replenish inventories, fueling sustained bullish sentiment in the futures market.

Meanwhile, the southern market mirrored the northern market's trend. Feng Na noted that although corporate inventories in the southern market had slightly accumulated before New Year's Day, with some temporary price reductions to boost sales after the holiday, low-end pricing quickly tightened afterward, driving prices upward in sync with the northern market.

Policy adjustments have further fueled the upward trend in propylene oxide prices. On January 8, the Ministry of Finance and the State Taxation Administration jointly issued Announcement No.2 (2026) on Adjusting Export Tax Rebate Policies for Photovoltaic Products, stipulating that value-added tax (VAT) export rebates for photovoltaic products would be abolished effective April 1, 2026, including primary polyether products. This policy directly triggered an export rush in the polyether industry, which subsequently impacted the upstream propylene oxide market.

Feng Na informed reporters that the export tax rebate rate for primary polyether reached 13%, but this incentive is set to expire soon. Foreign trade orders are expected to surge before April. Meanwhile, domestic downstream manufacturers, concerned about rising raw material costs, have been stockpiling ahead of time, fueling strong procurement demand. The market has become exceptionally active, with propylene oxide spot prices even reaching a 'one-ticket-hard-to-get' situation, driving prices higher in succession.

The surge in demand has driven polyether prices to skyrocket. According to Jinlian Chuang data, several polyether plants saw daily price increases of up to 500 yuan per ton. As the core raw material for polyether production, propylene oxide demand surged, driving prices higher and surpassing the expected ex-factory price of 8,500 yuan per ton, ultimately reaching 8,600 yuan per ton.

On February 6, shares of listed companies in the propylene oxide sector surged again, but the price of propylene oxide did not rise. Instead, it declined after entering February.

Feng Na analyzed for reporters that as propylene oxide prices repeatedly hit record highs, downstream market apprehension over high prices intensified, causing a rapid cooling of procurement activity in the market. Despite supply-side inventories remaining low, the cautious procurement mentality has significantly reduced market trading activity. Suppliers' willingness to support prices has gradually weakened, pushing the market into a downward correction phase.

Currently, oversupply remains the key factor influencing the price trend of propylene oxide. A staff member from Hongbaoli's board secretary office told reporters that the industry's operating rate is not high, and the sector is still in a state of oversupply. New production capacity is expected to be added in 2026.

Public data indicates that propylene oxide, a vital basic organic chemical feedstock, forms a complete industrial chain. This chain spans diverse raw materials including propylene, chlorine, and hydrogen peroxide, extending to downstream products such as polyurethane, solvents, and specialty chemicals. Within China's chemical industry ecosystem, propylene oxide serves as a pivotal link between upstream and downstream sectors.

In downstream consumption, polyether polyols account for the largest share at approximately 78%, serving as the primary raw material for polyurethane soft and rigid foams, elastomers, and related products. Propylene glycol makes up about 10% of the market, mainly used in unsaturated polyester resins, antifreeze solutions, and food and pharmaceutical applications. Alkyl ether solvents constitute around 4%, applied in coatings, cleaning agents, and electronic chemicals. The remaining portion is distributed across fine chemicals such as carbonates and other specialized fields.

The industry expert noted that despite oversupply in the sector, demand for propylene oxide continues to grow modestly. Taking Hongbaoli's products as an example, their primary applications are in refrigerators and container insulation. While China's domestic appliance market has declined in recent years, export growth has driven overall demand. Additionally, the industry is actively exploring new application areas, with automotive and robotics emerging as key growth sectors.

In the short term, industry analysts predict that the average price of propylene oxide in February may initially decline before rebounding. Feng Na told reporters that during the first half of February, the market is likely to experience downward volatility due to the restart of some domestic facilities and holiday periods for downstream enterprises. However, as downstream factories gradually resume operations in late February, a price rebound is anticipated. Nevertheless, the extent of this rebound may be constrained by social inventory levels and the overall supply-demand dynamics. Given the overall oversupply in the market for the month, the average price is expected to decrease month-on-month.

Jin Lianchuang has released a market analysis report on China's propylene oxide sector for February, projecting a market pattern characterized by "increased supply, diverging domestic and international demand, and cost support". Regarding pricing, the firm forecasts that ex-factory prices in Shandong Province will fluctuate between 7,800-8,200 yuan/ton, while delivered prices in East China are expected to range from 7,950-8,350 yuan/ton.