On April 21st, the stock price of chemical company Hongbaoli reached a historic high, skyrocketing nearly 300% in just two months!
The spark behind this explosive growth: two major giants, LyondellBasell and Covestro, have permanently shut down 315,000 tons of propylene oxide capacity in the Netherlands! The global chemical supply chain instantly suffered a gap! As a result, propylene oxide prices surged by 200 yuan/ton in just one week, breaking the historical barrier of 7,750 yuan/ton!
The main reason for the rise in propylene oxide prices domestically is the permanent shutdown of propylene oxide production by several overseas giants. Overseas production capacity is mainly concentrated in chemical giants like DuPont, LyondellBasell, Shell, BASF, and Covestro. Recently, due to the intensifying Russia-Ukraine conflict, combined with the impact of carbon tax policies, leading companies have increasingly adopted a "wait and see" approach. LyondellBasell, Covestro, Shell, Dow Chemical, and others have successively shut down their plants, reducing production by over 1 million tons. This has had a significant impact on the supply and demand dynamics in the propylene oxide market.
Domestically, companies like Wanhua Chemical, Binhuacheng, Qixiang Tengda, Hongbaoli, and Yida Co., Ltd. are major propylene oxide producers. However, due to the serious environmental pollution caused by low-end propylene oxide production, the process of eliminating low-end capacities has been accelerating both globally and domestically. The National Development and Reform Commission has included the chlorine-alkali method (production process) in the restricted category in the "Industrial Structure Adjustment Guidance Catalog (2024 Edition)" and plans to enforce the elimination of installations that do not meet specific conditions by December 31, 2025. This means not only will overseas production capacity be reduced by 1 million tons, but there will also be a significant amount of capacity to be phased out domestically.
Under the influence of domestic and international factors, the balance of supply and demand in propylene oxide may be disrupted, with price increases becoming a general "bet." Even more worrying is the potential supply shortage of raw materials for coatings, such as titanium dioxide and TDI.
The titanium dioxide industry is facing a similar situation, with companies such as Tronox, Covestro, and Venator recently shutting down factories, impacting several tens of thousands of tons of production capacity.
Tronox announced the closure of its titanium dioxide plant in Botlek, Netherlands, with an annual capacity of 90,000 tons. Closing the plant will help optimize remaining capacity and reduce overall manufacturing costs.
Covestro closed its plant in Taiwan, reducing its annual capacity by about 50,000 tons, aiming to optimize the profitability of its titanium dioxide business.
Venator announced the closure of its titanium dioxide plant in Duisburg, Germany, with a capacity of 50,000 tons/year, and reasonably adjusted its European titanium dioxide capacity of 130,000 tons, relocating the specialty titanium dioxide business from Duisburg to Uerdingen. Its plant in Scarlino, Italy, with an annual capacity of 80,000 tons, is also offline.
Titanium dioxide is an important raw material for the coatings industry, providing performance such as opacity, whiteness, and gloss. The closure of these plants will directly affect the global titanium dioxide supply landscape, thus impacting the raw material procurement costs and supply stability for coating companies.
In recent years, TDI overseas production capacity has been gradually reduced. BASF closed its TDI and its precursor plants at the Ludwigshafen base; Japan's Tosoh stopped TDI production at its Nanyo plant; and Argentina's Petroquímica Río Tercero announced the shutdown of its TDI plant in Cordoba, with a capacity of 28,000 tons/year.
TDI is a core raw material in the polyurethane industry chain, commonly used to produce polyurethane primers, intermediate coatings, and aromatic polyurethane topcoats, which are applied in furniture, wood products, construction machinery, steel structure anti-corrosion coatings, and more.
In March 2025, Evonik issued a force majeure statement regarding VESTANAT? IPDI, citing technical issues with its supplier that directly impacted production, announcing a force majeure on the supply of IPDI products.
Evonik’s core production base in Europe is one of the largest global sources of IPDI supply, accounting for 40% of global capacity. IPDI is mainly used in automotive coatings and wood coatings, and this supply disruption will affect the production of related coatings companies.
In addition to the reduction in capacity for the key raw materials mentioned above, it’s also worth noting that well-known chemical companies like Dow, Evonik, BASF, and INEOS have recently successively shut down factories. The products involved have a close connection with the coatings industry, which will indirectly impact the entire industrial chain.
In 2024, Dow Chemical closed its polyether polyol/alkoxylation chemical plants in the Nankan Industrial Park, Taiwan, and shut down its polyether polyol plant in Argentina. Polyether polyol is an important raw material for the production of polyurethane coatings, and its shutdown could affect the supply and cost of polyurethane coatings.
BASF will cease production of active ingredient glyphosate at its Knapsack and Frankfurt plants in Germany in 2024. In the first half of 2025, it will halt the production of cyclododecanone and cyclopentanone, and stop the production of adipic acid in 2025. Adipic acid is one of the raw materials for producing polyurethane and polyester coatings, and its suspension could impact the production of related coatings.
Evonik announced in 2024 a large-scale reorganization of its coatings and adhesives resins business, selling its polyester business used in coatings and adhesives. The sale of the polyester business and the closure of related production bases will affect the supply and development of polyester resins for coatings.
INEOS closed its polycarbonate production base in Stade, Germany, in 2024. Polycarbonate can be used to produce resins for high-end coatings, and its suspension may affect the supply of raw materials for high-end coatings.
Celanese temporarily stopped production of acetic acid, vinyl acetate monomer, and other products at its Singapore plant in 2024, as well as its VAM plant in Frankfurt, Germany. Vinyl acetate monomer is a key raw material for producing polyvinyl acetate emulsion coatings (white glue), and its shutdown will directly impact the production of these coatings.
INEOS closed its ethanol plant in Grangemouth, Scotland, in 2024, its ABS production plant in Adiston, Ohio, in 2025, and confirmed it would not restart its styrene plant in Sarnia, Ontario, Canada in 2025. Ethanol is used as a solvent or intermediate material in coatings production; ABS resin can be used to produce plastic coatings; styrene is an important raw material for producing unsaturated polyester resin coatings and polystyrene coatings. The closure of these factories will affect the production of corresponding coatings.
Covestro will close its polyether polyol plant in Kaohsiung, Taiwan, in 2024, and in 2025, it will permanently close the propylene oxide/styrene monomer production facility in Maasvlakte, the Netherlands, in cooperation with LyondellBasell. Polyether polyol is used in the production of polyurethane coatings; propylene oxide is an important raw material for producing epoxy resins, which are widely used in industrial anti-corrosion coatings, floor coatings, and ship coatings; styrene is used for producing unsaturated polyester resin coatings. The closure of these facilities will affect the raw material supply for various coatings.
In January 2025, Mitsubishi Chemical announced the termination of its investment plan for a new 350,000-ton MMA monomer plant in Geismar, Louisiana, USA. Methyl methacrylate (MMA) monomer is a key raw material for acrylic resins used in automotive lamps, signs, and coatings.
The shutdown and reduction in supply of raw materials such as propylene oxide, titanium dioxide, and TDI have directly increased procurement costs. Insufficient raw material supply makes it difficult for coating companies to produce as planned. They either have to purchase at high prices or delay delivery, resulting in a complete halt. This puts coating companies under pressure to decline profits in the short term, with some small and medium-sized enterprises struggling to survive. Regarding product performance, titanium dioxide provides opacity and whiteness, TDI affects the hardness, abrasion resistance, and chemical resistance of coatings—both are crucial. The lack of supply of high-end raw materials makes it difficult for coating products to meet performance standards, severely impacting product quality and market competitiveness.
Some coating companies have expressed that such situations are not uncommon, with cyclical market fluctuations affecting business strategies. However, when the downstream market doesn't recover, coating companies need to focus more on "cost-cutting" measures, such as signing long-term agreements with upstream suppliers or finding domestic alternatives for imported materials, or even mixing domestic and foreign materials to avoid sudden "black swan" events. Looking at the entire chemical industry chain, the future development direction is undoubtedly policy-driven, focusing on green environmental protection, low carbon energy conservation, emission reduction, and high performance. These products and processes will gradually replace outdated capacities and products. If manufacturers in the industry chain do not actively change, they may be left behind when the downstream market deteriorates and the chemical industry chain is forced to change, making it too late to act.
