Polyether: This Rally Looks Set to Soar a While Longer

Lead-in: Starting from the end of the month, after several days of stable pricing in the polyether market, an increase in orders occurred. Coupled with reduced operations at major cyclopropane plants in Shandong, this led to a slight increase in prices. After the price hike, polyether demand weakened somewhat, and prices remained relatively stable. Then, cyclopropane prices rose slightly again. It was assumed that this would be the final price increase, but something unexpected happened. Polyether experienced a dramatic change, with prices hitting the upward button and entering flight mode.

Polyether ushers in its largest price increase of the year so far, with the upward trend approaching.

July 26-27: After following the price increase of propylene oxide, demand for polyether began to grow, with a noticeable increase in orders and relatively active trading sentiment. Downstream just-in-time demand was acceptable.

On July 28th: The orders received by polyether factories on the day were relatively good, with most factories having new orders above the average. The price of soft foam polyether in Shandong and North China increased to 7,400-7,500 yuan/ton. Additionally, the mainstream propylene oxide factories in Shandong have just resumed normal operations, and inventory is relatively low. The cost has once again been adjusted upwards, with the increase rising from the original 50 yuan/ton to 100 yuan/ton.

July 29: The demand for polyether continued, and order-taking remained acceptable. On that day, the starting auction price for soft foam polyether from a major manufacturer in South China rose to 7,600 RMB/ton self-delivery, and finally closed at 8,100 RMB/ton self-delivery, an increase of 450 RMB/ton compared to last week's soft foam polyether auction closing price. The price increase for soft foam polyether in South China was relatively large and rapid, directly breaking through the 8,000 RMB/ton mark, becoming the first region to surpass 8,000 RMB/ton since mid-March. In the afternoon of the same day, the price of propylene oxide was further raised by 100 RMB/ton.

On July 30th, the increase in cyclopropane prices showed no signs of slowing down. In Shandong and North China, the price of soft foam polyether followed the rise to 7800-8000 yuan/ton, and the prices of other grades also saw a significant increase. Polyether orders continued to flow in steadily. Although some factories in Shandong and East China reduced their orders, several major manufacturers still saw a certain increase in order volumes and were actively shipping products while taking orders. In East and South China, the price of soft foam polyether soared to 8400 yuan/ton, as if it had taken off on a plane. In the afternoon, a major polyether manufacturer in Binzhou, Shandong, stopped taking orders and sales, with prices continuing to rise. In the afternoon, due to still strong demand and relatively low inventory, the price of cyclopropane was further increased by 100 yuan/ton.

The reason for sustained flight

The continuous increase in polyether prices following propylene oxide, with a greater increase than propylene oxide, is primarily due to the expansion in demand. However, aside from demand reasons, can you think of other reasons for the significant price increase? Firstly, in July, a major factory in the north and a major factory in South China continued to supply traders' contracts at a discount, while a major factory in East China operated at low capacity, resulting in a significantly low supply. This led to reduced spot availability for traders, early completion of tasks, and no pressure to sell, even beginning to presell August volumes. Coincidentally, demand was relatively favorable, and thus prices increased. Additionally, Covestro's polyether production in Germany was halted due to force majeure, leading to some improvement in exports as it holds relatively large capacity in Europe. However, July is typically the off-season, so why did polyether demand suddenly improve? With continuously low propylene oxide inventory and rising cost trends, this heightened the downstream fear of price increases, prompting industry participants to increase purchases when prices were low. The more orders there are, the stronger the market's price-supporting mentality becomes, and buying interest continues. However, end customers' purchasing power is not very strong, and customers have low acceptance of excessively high prices. Downstream is also worried about the continuous rise in prices, concerned that excessively high costs cannot be fully passed on to end customers, which is why they increase purchases within relatively acceptable price ranges.

In summary, although each increase in cost is not very large, the rise in polyether has been quite significant, and demand still has some continuation. Therefore, prices may continue to rise for a while. However, as prices continue to rise, there will eventually be a peak that causes downstream purchasing to decrease. Currently, it seems that the price increase may still continue for a while, but it is expected that this will not last long. It is recommended to stock up as needed in the short term when prices are low.