With the expansion of multiple domestic production facilities in the coming years, competition in the propylene oxide market is expected to intensify. A key development was the launch of the CSPC Shell project, which has an annual capacity of 250,000 tons. The first batch of products was delivered to the domestic market, with prices ranging between 15,500 and 15,600 yuan per ton—equivalent to about 17,500 yuan in 2005. This marked the end of the high-profit era for propylene oxide, as historical price peaks were unlikely to be repeated.
As of the end of 2005, there were 12 major domestic producers, with a total installed capacity of nearly 600,000 tons (excluding China Shipping Shell), of which 550,000 tons were effectively operational. In that year, the industry produced 513,000 tons, achieving an operating rate of 92%. Domestic demand reached 648,000 tons, resulting in a self-sufficiency rate of nearly 80%, with imports totaling 146,000 tons, mainly from Japan and Singapore. Some domestic companies, such as Jinxi Chemicals and Shandong Binhua, started exporting small quantities in 2005.
The primary downstream application of propylene oxide was polyether polyol, which accounted for 85% of total consumption in 2005—far exceeding the global average of 70%. Since the early 1990s, consumption had grown rapidly, with an average annual growth rate of 22.6%. However, after 2005, growth slowed due to the maturing polyurethane industry, with the demand growth rate dropping below 5%. Looking ahead, the annual growth rate is expected to remain under 10% over the next five years, reaching a consumption volume of 1 million tons by 2010.
In 2006, the domestic market saw the most new capacity added in its history, with nearly 400,000 tons of new production capacity coming online. Another 400,000 tons were expected to come online in the following years, pushing total capacity to 1.4 million tons by 2010. Industry experts anticipated that demand growth would slow due to reduced demand from downstream sectors, but apparent consumption was still expected to rise sharply in the short term. By 2006, consumption was projected to reach 770,000 tons, a 20% increase from 2005. By 2010, total demand was expected to surpass 1 million tons, leading to a balance between supply and demand and the potential for exports.
The completion of the 250,000-ton CSPC Shell project marked a turning point for the domestic market. As the largest single unit in China, it used a more efficient co-generation process, giving it lower production costs compared to the traditional chlorohydrin method. The project is expected to play a crucial role in domestic supply and pricing. Approximately 130,000 tons will be used internally, while another 110,000–120,000 tons will be available for commercial sale. With its strong market presence, the project is likely to capture significant market share from both domestic and foreign suppliers.
Domestically, sales are expected to focus on Jiangsu, Zhejiang, Shanghai, and Tianjin, while North and Northeast China will continue relying on local production. The polyether polyol industry remains the main consumer, and by 2010, its share is expected to adjust to around 80%.
Globally, the 250,000-ton plant will also impact the Asia-Pacific region. By 2006, the supply-demand imbalance in the region is expected to be corrected, with a more balanced market. Over time, domestic imports may decline or even disappear, reducing the presence of foreign suppliers. The CSPC Shell project’s cost advantages and localized management give it a competitive edge over foreign firms, leading to increased competition and downward pressure on prices. Profit margins for manufacturers are expected to normalize, with prices in 2006 likely to stay within the range of 12,000 to 15,500 yuan per ton.
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