Introduction: In early May, the price of propylene, the main raw material for octanol, surged significantly, once again pushing octanol production into a loss-making state. Driven by cost factors, the octanol market saw a narrow uptick in focus after the holiday. However, as high-priced raw materials gradually declined, the octanol market lost its cost support, and high-priced octanol faced sluggish trading.

I. Sharp rise in costs leads to lower operating rates for octanol

During the May Day holiday, the price of propylene, a key feedstock, rose substantially. The price of propylene in Shandong reached highs of 9,700–9,800 yuan/mt. As a result, octanol costs increased significantly compared with pre-holiday levels. After the holiday, cost pressures prompted producers to raise their offers, but the price increase was far smaller than the cost increase. In the three working days after the holiday, the average propylene price in Shandong rose by more than 400 yuan/mt versus the previous week's average, increasing octanol feedstock costs by 280 yuan/mt. However, the average octanol price in Shandong increased by only 45 yuan/mt, and high-priced deals were difficult to conclude. This shows that high-priced octanol faces resistance when being passed down to end users. Based on spot propylene prices, ex-plant octanol prices in both Shandong and East China entered loss-making territory.

Under cost pressure, two plants in East China and North China took the opportunity to shut down for maintenance after the holiday, while one plant in Shandong reduced its operating rate. Daily octanol production fell by about 1,000 mt, and the capacity utilization rate dropped to 88%. However, as the two new production capacities in North China and South China continued to ramp up steadily—with notable incremental output from the new North China capacity—the plant turnarounds and production cuts did not create supply tightness in the market.

II. Overall supply expected to remain ample; sellers focus on destocking

In the short term, although two plants have recently been shut for maintenance, they are expected to restart later this month. Octanol supply will recover to relatively high levels later in the month. The short-term tightening in supply alleviates pressure on spot sales in the market. Based on current theoretical supply-demand dynamics, with several units undergoing concurrent maintenance, the market is essentially balanced, with the supply-demand gap narrowing to 2,000 mt. Coupled with inventory buildup in the octanol industry this week, supply will remain ample next week. The impact of maintenance news on the market will gradually diminish.

Octanol Market Weekly Supply and Demand Data Forecast (Unit: 10,000 mt)

| Indicator | Current Period | Next Period Forecast | Change | Change (%) |
|-----------|----------------|----------------------|--------|------------|
| Production | 8.2 | 7.7 | -0.5 | -6.10% |
| Capacity Utilization Rate | 88% | 83% | -5% | - |
| Consumption | 7.2 | 7.5 | +0.3 | +4.17% |
| Supply-Demand Gap | 1 | 0.2 | - | - |

From a cost perspective, the tightness in propylene supply will gradually ease in May. With downstream product plant operating rates declining, propylene producers are increasingly facing sales pressure, and negotiation focus will continue to move lower.

Since the post-holiday uptick in the octanol market was primarily cost-driven, and with a relatively clear expectation of lower propylene prices going forward, downstream buyers have slowed their spot octanol purchases, putting pressure on high-end offers. Given the ample octanol supply, increased competition among producers has pushed industry profitability to low levels, making the propylene price trend a stronger directional indicator for the octanol market. Next week, some octanol units will remain in maintenance, so the supply-demand imbalance is not yet pronounced. However, the medium- to long-term supply-demand gap persists, leading producers to actively seek orders and destock. Affected by downstream resistance to high prices, the downward pressure on high-end prices will increase next week, and downstream users will mainly procure on a need-to basis at lower prices.