Overview
Since mid-to-late August, the domestic methyl ethyl ketone (MEK) market has accelerated its decline. The primary driver was a retreat in feedstock C4 raffinate prices from elevated levels, which weakened cost support and weighed on market sentiment. At the same time, terminal demand showed no marked improvement, spot transactions remained thin, and room for price concessions in negotiations kept widening, dragging the overall trading focus lower. As of this writing, the reference negotiation price in the Jiangsu market stood at 7,700 yuan/ton, down 4.05% from the previous peak.
1. Raw Material Prices Fall, Cost Support Weakens
Since early August, C4 raffinate prices continued to climb while downstream derivative markets remained weak, squeezing industry profit margins from both sides. As a result, producers' incentive for further processing diminished, and some switched back to selling C4 raffinate externally, leading to a significant increase in regional product circulation. The concentrated release of supply exceeded the short-term absorption capacity of the Shandong market, breaking the previous tight supply-demand balance in the C4 raffinate market and forcing prices downward under pressure. Consequently, cost support for MEK plants weakened. Combined with sluggish terminal demand, producers saw poor new-order performance and continuously widened actual price concessions. Prices retreated from highs, while overall transaction volumes saw little notable release.
2. Higher Operating Rates, Ample Market Supply
In August, the MEK industry operating rate held at around 76%, up 6.3 percentage points from the previous month. During the month, Anhui Zhonghuifa's unit was shut down for catalyst replacement, while other units maintained stable operations, so total maintenance-related output losses were limited. Meanwhile, social inventories and in-transit cargoes accumulated simultaneously, and no supply gaps emerged in the East China or South China markets. With ample spot supply in circulation, the market lacked meaningful upward support.
3. MEK Industry Profitability Remains Under Pressure
In early August, as C4 raffinate prices moved upward with fluctuations, cost pressure on MEK plants surged, and theoretical industry profits quickly fell into loss territory. The average loss during the early-to-mid month period once reached -1,250 yuan/ton, with losses continuing to widen. By late August, selling pressure on MEK plants gradually eased, and offer prices were repeatedly raised upward. The product's price gains temporarily outpaced those of the feedstock, allowing industry profits to gradually recover. At the same time, C4 raffinate prices softened from high levels and declined. The downward shift in the cost line, combined with upward MEK price adjustments, created a two-way recovery that further narrowed losses, bringing profits essentially back to around the breakeven level.
4. Market Outlook
From a cost perspective, after the pullback in late August, Shandong C4 raffinate prices are likely to see limited further downside in September, supported by downstream demand. This will provide bottom-end support for MEK, and industry profits are expected to fluctuate around the breakeven level.
On the supply side, no new shutdown or output-reduction plans have been announced for production units in the near term. Industry operating loads are expected to remain broadly stable, spot supply will stay ample, and producers will continue to face selling pressure.
On the demand side, driven by the traditional "golden September" peak season, downstream operating rates are expected to improve, and follow-up purchases of small orders for domestic essential demand will increase month-on-month. Meanwhile, export inquiries rebounded in August, which may support September export volumes at around 20,000 tons. Export demand will provide some buffer to spot market inventories by diverting supply. However, end-users' acceptance of high prices remains low, and the pace of demand recovery is insufficient to fully absorb market supply.
In summary, the supply-demand contradiction in the MEK market is unlikely to ease in the short term. Cost-side support will limit the scope for further declines, while ample supply will cap any rebound. With producers' price-support stance repeatedly pitted against holders' willingness to offer concessions, the market is expected to consolidate weakly around the cost line in the near term. Going forward, close attention should be paid to the trend of C4 raffinate prices and the sustainability of export orders.
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