China Propylene Glycol Market to Wake Up to a Worse Supply Glut in 2022 On Bearish Feedstock and Muted Demand

After touching historic highs during the third quarter, China’s propylene glycol market is retreating to low futures in December. As per the ChemAnalyst database, last week price trend assessed for Propylene Glycol FOB Qingdao valued at USD 2710/MT after registering an astonishing fall rate of 31% from the price assessed 3 months back. The continuously falling prices in the running month have been prompted by declining propylene feedstock prices and muted propylene glycol demand in the automobile sector.

Riding on the back of rising upstream crude oil inventories in the international market, the propylene futures are reflecting bearish market sentiments. The uncertainty arising in the petrochemical sector with the emergence of the Omicron variant of Coronavirus has restricted the propylene producers to make a positive price revision, while buyers in the downstream sectors have rushed into stockpiling of propylene. Thus, the availability of surplus propylene feedstock has reduced the production cost of propylene glycol.

Meanwhile, the pressure on the demand side has also decreased significantly. While the propylene glycol consumption in the pharma sector remains stable, the depressed demand for propylene glycol coolants in the automobile sector is another crucial factor responsible for driving down the prices of propylene glycol in the Chinese market. China, which boasts the world’s largest car market, has been struggling with continuously declining sales for seven consecutive months with November sales rounding up on a fall of 9.1% from the sales in the last year. The falling sales numbers is a result of dwindled manufacturing activities owing to the globally dominant semiconductor shortage.

What Lies Ahead?

According to ChemAnalyst, the propylene glycol market, which is already sailing on low price trends, is expected to continue bearish market sentiments in early 2022. The downward pressure on crude oil futures along with the underperforming automotive industry is expected to push forward the state of overabundance in the propylene glycol market which looks unlikely to be resolved soon.