Supply Chan Issues and High Demand Pave the Way for Oxygen Price Hike in September

Oxygen prices in China have been on the rise since early September due to halted production stemming from logistical challenges. The higher demand for Oxygen from healthcare and industrial sectors has further fuelled the price increase. Unfavourable weather, logistical challenges, and supply chain disruptions have intensified the situation, impacting Oxygen production as manufacturing activities were not operating at full capacity. Typhoon Yagi has caused severe supply chain disruptions that have affected industries in Vietnam, Taiwan, and some areas of China.

According to the National Bureau of Statistics, the Purchasing Managers' Index (PMI) for manufacturing in China fell by 0.3 percentage points in August compared to July.

As China prepares for the upcoming winter season, coal consumption is expected to rise significantly. This increase is driven by the nation's heavy reliance on coal for electricity generation, particularly during peak demand periods. The anticipated rise in coal consumption in China is poised to have a significant impact on the electricity demand, which may hamper the country’s manufacturing sector and eventually may affect Oxygen manufacturing as well. As downstream industries expand their operations to meet the growing demand for products, their need for Oxygen will also increase.

The country's miners increased coal production to a seasonal high of 390 million in July 2024, reflecting the growing demand for coal as a fuel source for electricity generation from 378 million in July 2022 and 373 million in the same month the previous year. Likewise, coal consumption for electricity generation is expected to be on the higher side to ensure winter power supply. Given the increasing reliance on coal-fired generation, particularly during peak winter demand, coal consumption will continue to rise in the coming months which would have a direct bearing on Oxygen production. China's electricity system relies heavily on coal-fired generation, particularly during winter when hydro and solar output is lower. To ensure a stable power supply throughout the winter, China’s coal consumption must be boosted. This is particularly important as the nation's electricity consumption exhibits a "double peak" in summer and winter.

Given the anticipated increase in coal consumption in China, industries are expected to experience a corresponding rise in electricity demand, which may lead to rise in production costs of all the products in the country including Oxygen. Oxygen is an essential element in numerous industrial processes, including steelmaking, glass manufacturing, and chemical production. As these industries ramp up their operations to meet the increased demand for coal-derived products, their need for Oxygen will also grow.

Based on ChemAnalyst pricing intelligence, the demand for Oxygen from downstream industries is projected to remain elevated in the coming months.