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June 22, 2020

Global Propylene Oxide Market Snapshot

Propylene oxide

Propylene oxide is a chemical intermediate predominantly used in the production of polyether polyols and propylene glycol.

Global propylene oxide demand is expected to contract in 2020, due to the impact from the Covid-19 pandemic, before growing at similar rates to GDP growth rates for the following four years.  Apart from the postponement of several downstream capacity additions in 2020, particularly in Asia Pacific, nearly all global manufacturing sectors are expected to significantly contract.  This is due to minimal capacity addition anticipated for all derivatives and domestic consumption of all derivatives projected to fall globally in 2020. 

Asia Pacific is the largest consuming region of propylene oxide, and also typically has the highest growth rates due to increased usage for derivative production in China.  China’s propylene oxide growth rates have always been positive and stayed above global consumption rates, except for 2017, where China’s growth rate was below the global average.  China has contributed more than 60 percent of demand in the region between 2012 and 2019. 

Polyol polyols accounts for seventy percent of propylene oxide demand.  Consumption of propylene oxide is therefore strongly influenced by trends in the polyols industry, which is largely driven by the housing industry.  Polyols can be divided into foam (rigid and flexible) and non-foam (coatings, adhesives, sealants, and elastomers) applications.  Polyols are reacted with an isocyanate to form polyurethanes.  Polyurethane end uses include flexible foams for the furniture and automotive industries; rigid foams for appliance and building insulation; and various non-foam applications including coatings, adhesives, sealants, and elastomers.  Sectors of the polyurethanes markets such as furnishing are maturing, but others such as automotive and insulation have better growth potential.

The global polyether polyols market is estimated at around 8.5 million tons and is forecast to grow at an annual average rate of three percent over the next few years following recovery from the Covid-19 related downturn in 2020.  Key industries influencing the global demand of polyether polyols are the automotive, furniture, bedding, packaging and appliances manufacture.  Growth of polyether polyols is typically more volatile than GDP growth since demand depends heavily on durable consumer goods, which are more elastic than GDP.  Polyether polyols are expected to grow at slightly above GDP rates, driven by the increasing middle class population in developing regions like China and India.  Furthermore, in regions such as Asia and the Middle East the increase in the construction of commercial and residential buildings will help to support growth in polyether polyols consumption and demand.

Propylene oxide process technology has undergone dramatic changes over the last few years.  Beginning in 1974, the propylene oxide process that was generally considered the low-cost method was propylene oxide–styrene monomer (POSM) process.  Within the process, 2.3 tons of styrene is produced for each ton of propylene oxide.  Therefore, POSM technology users are in the styrene business whether they want to be or not.  Similarly, propylene oxide–tertiary butyl alcohol (PO/TBA) technology users are in the methyl tertiary butyl ether (MTBE) business. 

In the near term, firm capacity will be added in China, Thailand, India, the United States, and Central Europe.  Major developments in Western Europe are not expected due to weak demand growth as well as the lack of competitive advantage.

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Market Analytics: Propylene Oxide - 2020 provides analysis and forecasts to 2045 of supply and demand of the global propylene oxide market.  Propylene oxide demand is segmented by polyether polyols, propylene glycol, glycol ethers and others.   This analysis identifies the issues shaping the propylene oxide industry as well as provide detailed demand breakdown by end-use and supply, demand and net trade data for 40 countries.

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