Rising Demand and Supply Issues Propel Propylene Glycol Prices to New Heights

In January 2024, a discernible upward trajectory in Propylene Glycol prices has been noted globally, deviating from the patterns observed in preceding months. This shift is primarily driven by continuous demand from downstream sectors, including food and beverage (F&B), and pharmaceutical industries. Additionally, ongoing logistical challenges, constrained supply, and seasonal influences further contribute to the evolving market dynamics of Propylene glycol.

A key influencer of Propylene glycol pricing was the stability and strength observed in the raw material market, particularly propylene oxide. Prices in the domestic propylene oxide market had risen, supported by increased costs. Throughout January, the supply of propylene oxide remained stable, with continued activity in downstream inquiries and purchases. While actual market transactions were average, some factories slightly accumulated inventory in the middle of the month, but the pressure on inventory was deemed manageable.

The proximity of the Chinese Lunar New Year in late January typically leads to production slowdowns and increased demand for goods before the holiday. This month, the anticipation of potential supply disruptions during the holiday period led to pre-holiday purchasing and subsequent price increases of Propylene glycol. With the anticipated price hike, market participants chose to stockpile Propylene glycol to secure a stable supply, exerting additional pressure on prices and contributing to an upward trajectory.

Apart from these market dynamics, complications in logistics have added another dimension to the situation. The escalating Houthi attacks on vessels navigating through the Red Sea have compelled container ship and ro-ro operators to redirect their vessels to safer routes, avoiding potential danger, which has resulted in heightened freight charges and increased operational costs. These additional expenses are currently being transferred to consumers in the form of elevated prices, further underscoring the global upward trend in Propylene glycol prices.

In Europe, the escalating challenge of extreme weather is increasingly impacting transportation, disrupting supply chains, and impeding the flow of goods along crucial waterways. This trend is anticipated to intensify moving forward, leading to delays and additional costs that support the upward trajectory of Propylene glycol prices. Additionally, Propylene glycol, commonly used in antifreeze applications, experiences heightened demand during winter months, further contributing to seasonal price increases.

Meanwhile, in the USA, consumer sentiments reached their peak in January, driven by a growing sense of optimism about the prospects of inflation and household incomes. This positive sentiment also played a role in the heightened demand for Propylene glycol in downstream sectors, consequently driving up prices.

According to ChemAnalyst's analysis, there is an expectation that the upward trend in Propylene Glycol prices will persist in the upcoming period, driven by sustained demand from end-user segments. Furthermore, the anticipated rise in raw material prices is positioned to maintain a positive market sentiment.