In early June, with high plant operating rates, PO manufacturers produced stable output. The strengthened exchange rate, high ocean freight and feedstock costs led to weak slab polyols exports. This, coupled with weak domestic demand as only contract customers placed small orders to meet immediate needs, led to accumulation of inventories at PO manufacturers. As a result, the PO price plunged. This, coupled with bearish sentiments among market participants, led price for slab polyols to drop by RMB 2,400/ton. As the sponge sector entered its off-season, sponge manufacturers received fewer orders starting from May and therefore had their operating rates stay low. besides, their inventory levels were also high. Thus, they had limited demand for slab polyols. Demand from the waterproof and runway sectors was modest, lending limited support to slab polyols price.In the middle of the month, the market for slab polyols remained weak. Bearish on the PO price, slab polyols manufacturers based production on sales prospects and kept their inventory levels low. With high inventory levels, sponge manufacturers placed small orders to replenish inventories. Due to the shortage of chips auto manufacturers had shrunk demand for HR polyols. thus the HR polyols market was sluggish. since the end of 2020, many carmakers have suspended production due to the shortage of chips. As of May 2021, major auto manufacturers such as SAIC Volkswagen, GAC-Toyota, NIO, GM, Ford, Volkswagen, Nissan, Renault and Hyundai had suspended production or planned to reduce production. Although the waterproof and runway sectors are in peak season, projects are postponed due to expected decline in feedstock prices, rainy season, restriction on power consumption and the COVID-19 pandemic.As the Dragon Boat Festival approached, downstream manufacturers made purchase only to meet immediate needs. During the festival, the demand became weak. But after the festival the number of orders increased. As PO manufacturers in South China signalled price increase, slab polyols manufacturers actively stocked inventories, resulting in improved trading of PO.In the last ten days of June, news of manufacturers lowering their production loads were frequently heard, including Zhonghai Fine Chemical, Sinopec Changling Refining and Chemical, Jishen Chemical Industry and Sinochem Quanzhou Petrochemical. For fear of price increase for PO, slab polyols manufacturers stocked inventories, propping up PO price, which in turn drived up the price for slab polyols. At the end of the month, as the CPC Founding Day approached, plant operation and transportation were restricted. Also, buyers’ interest in making purchases waned. as a result, the PO price entered the consolidation mode. After the celebration, transportation restriction was lifted, easing inventory pressure on PO manufacturers. Therefore, they continued to raise prices, waiting for feedback from buyers.Market outlook: It is heard that currently buyers stock inventories for future 20-day use and even 3-month use. It is expected that mainly under consolidation, slab polyols price will continue to rise in early July. But considering the low demand from downstream manufacturers and weak exports, the room for price increase is limited. In the second and third 10 days of the month, the price is likely to decline.
