Headline: Geopolitical tensions in the Middle East persist, international crude oil prices remain elevated, operating rates at integrated refining and chemical facilities in China's eastern coastal regions have seen a further slight decline, prices for pyrolysis C5 and isoprene have risen significantly, and C5 petroleum resin producers are facing pronounced cost pressures.

1. Significant Price Increases for Pyrolysis C5 and Isoprene

Domestic isoprene prices continued to rise this period. The mainstream ex-factory price range saw its low end increase by 2,500 RMB/ton and its high end increase by 1,950 RMB/ton, reaching 13,000 - 16,050 RMB/ton. The primary reasons are reduced plant output, producers holding back supply to support prices and showing reluctance to sell, and downstream buyers being forced to chase higher prices to meet rigid demand.

Prices for industrial-grade pyrolysis C5 from major producers were raised by 150-250 RMB/ton, while prices from private enterprises saw a more pronounced increase. On Thursday, April 2nd, pyrolysis C5 prices in North China rose by 250 RMB/ton to 7,250 RMB/ton, in East China by 250 RMB/ton to 7,300 RMB/ton, in Northeast China by 250/430 RMB/ton to 6,900-8,450 RMB/ton, and in South China by 250 RMB/ton to 7,150-7,300 RMB/ton.

2. C5 Petroleum Resin Profits Turn Negative in Some Segments

This week, prices for road marking paint-grade C5 petroleum resin increased by 500/0 RMB/ton to 13,000-16,000 RMB/ton, while high-end product prices rose by 1,500/1,000 RMB/ton to 15,000-17,000 RMB/ton. Prices for adhesive-grade C5 petroleum resin increased by 1,000 RMB/ton to 15,000-17,000 RMB/ton, and transaction prices for de-cyclized C5 petroleum resin rose by 500 RMB/ton to 14,000-14,500 RMB/ton. C5 petroleum resin units using isoprene as feedstock have essentially entered a loss-making state, while profits for de-cyclized C5 petroleum resin using pyrolysis C5 as feedstock remain positive.

3. Downstream Demand

With significant price hikes for raw materials like petroleum resin and SIS, downstream hot melt adhesive producers have been relatively quick to pass on the increased costs. It is reported that cumulative price increases from March 7th to April 3rd followed the 50-100% rise in raw material costs, with adhesive price increases in the 50-70% range. For hot melt coatings, however, the overall price increase has been around 17%, making it difficult to fully pass on the cost increases. Due to the difficulty in cost pass-through in some downstream sectors, transaction volumes have declined noticeably. This has shifted some procurement towards rosin resin, driving its price up by over 25%.

Summary and Outlook

Overall, there is still room for further increases in pyrolysis C5 prices, which are estimated to potentially rise above 8,000 RMB/ton. The scarcity of isoprene supply and continuously rising bidding prices are expected to push the negotiation range significantly higher to 13,000-17,410 RMB/ton. Profits for C5 petroleum resin are being further eroded, and the operating rate has continued to decline to 66.7%, with further decreases anticipated.

Post-holiday, it is expected that the supply of raw material C5 and isoprene will remain tight. Although the pace of price increases may moderate, prices are likely to reach new historical highs. C5 petroleum resin producers, facing reduced supply volumes and widening losses, are expected to continue pushing prices higher. However, excessively high prices may impact demand in some downstream segments, potentially leading to a continued steady decline in market transaction volumes.