Chemicals: Propylene oxide prices rebound

Last week saw a continued upward trend in R22 prices, with an increase of 9.52%. The domestic refrigerant R22 market remained strong, supported by stable supply and peak season demand for air conditioners. Market participants remain optimistic about the outlook, despite production quota restrictions and sluggish by-product sales, which have led major manufacturers to operate at medium-to-low levels, resulting in a tight supply situation. Despite high prices, demand from downstream sectors remains strong, and merchants continue to secure supplies as needed. While the price is expected to rise further, the growth potential is likely to be limited. Dichloromethane prices also surged, rising by 10% in the previous week. This increase was driven by strong raw material support, aggressive pricing strategies from traders, and a seasonal maintenance period that has tightened supply. Some manufacturers are still undergoing repairs, while others maintain high production levels. Low industry inventory and limited availability in the market suggest that prices will likely continue to climb in the near term. Propylene oxide (PO) prices rebounded significantly, with a 7.76% increase last week. Domestic PO prices rose over 1,000 yuan per ton, and supply remained slightly tight due to smooth shipping from manufacturers. The price increase can be attributed to several factors, including maintenance shutdowns at key facilities like Zhenhai Refining and Shandong Xinyue, temporary supply disruptions from Jishen, and a slight recovery in propylene prices. However, with a large volume of imported PO available in East China ports and potential new supply from Kyrgyzstan, the upward movement is expected to be moderate in the short term. Glyphosate prices fell by 4.8% last week, continuing a downward trend in the market. The mainstream price dropped to around 3–3.10 yuan per ton, with offers falling to 3.2–3.35 yuan. Following the market consolidation after the 2009–2010 winter, the top producers now account for 70–90% of total output. Environmental regulations are gradually tightening, and manufacturers must comply with stricter waste emission policies. With weak demand and increasing supply from the upstream glycine market, glyphosate prices are expected to remain under pressure in the short term. Overall, chemical product prices remained relatively flat last week. Out of the 118 tracked products, 27 saw declines, 28 increased, and 63 remained unchanged. On a monthly basis, more products saw price drops than increases. This stability reflects the mixed dynamics of the chemical sector, where peak season demand is not enough to offset weak overall market conditions. Looking ahead, R22 and PO present interesting trading opportunities. R22's price increase is fueled by capacity constraints, lower operating rates, ODS quota controls, and seasonal demand. Although the price may continue to rise in the short term, its impact on listed companies' performance is limited due to overcapacity in Other refrigerants like R125. Therefore, investors should remain cautious when considering exposure to this segment.