Introduction: In the first half of 2026, various aspects of the domestic n-butanol market experienced changes. Firstly, prices surged at the end of February, driven by a sharp rise in international crude oil prices due to heightened geopolitical tensions, subsequently fluctuating at high levels before beginning a downward trend in April. Secondly, n-butanol faced increased high-cost pressure as raw material prices soared, pushing profits into a loss-making phase. Additionally, due to the prolonged period of negative margins, plant shutdowns and production cuts increased, hitting a low point for the year in operating rates, which eventually led to a stabilization and recovery in market prices.
I. N-butanol Spot Price Trends in the First Half of 2026
In January, the Ministry of Finance and the State Taxation Administration of China announced the cancellation of VAT export rebates for certain products effective April 1, 2026. This policy-driven advantage boosted foreign orders for downstream plasticizers, increasing demand and driving n-butanol market prices upward. Although after the completion of export orders in February, demand declined, leading to lower market transaction volumes and a subsequent price drop, the end of February saw a substantial increase in international crude oil prices due to heightened geopolitical tensions in the Middle East. This caused raw material propylene prices to surge, and the pressure from high costs and low margins propelled market prices to a peak. In April, domestic n-butanol market prices began to fluctuate downward. First, as geopolitical tensions eased, international crude oil prices fell significantly, leading to a notable decline in raw material prices. Second, several major downstream sectors experienced prolonged losses, resulting in a significant decrease in overall operating rates. Overall market demand was weak and insufficient to support high price levels. By the end of June, ex-factory prices in the Shandong region stood at 5,750-5,800 RMB/ton.
II. Changes in N-butanol Supply in the First Half of the Year
First, in 2026, total domestic n-butanol production capacity reached 4.385 million tons per year, an increase of 160,000 tons per year from Guangxi Huayi compared to the second half of 2025. Second, total domestic n-butanol output in 2026 was approximately 1.36 million tons, an increase of 60,000 tons, or 4.62%, compared to the first half of 2025. This was due to new n-butanol production facilities in South China, which came on stream in the second half of 2025 and achieved full capacity release in the first half of this year.
From February to April in the first half of 2026, domestic n-butanol production showed a month-on-month increasing trend, gradually supporting a supply surplus. Subsequently, with raw material prices rising sharply and continuously, n-butanol cost pressures increased significantly, leading to negative gross margins and a period of losses for n-butanol plants. As the loss-making period lengthened and downstream markets entered the off-season, demand for n-butanol continued to decline. The oversupply situation in the market intensified, and more major plants implemented shutdowns or production cuts.
III. Changes in N-butanol Consumption in the First Half of the Year
In January of the first half, the announcement by the Ministry of Finance and the State Taxation Administration regarding the cancellation of VAT export rebates for certain products from April 1, 2026, positively impacted the downstream plasticizer sector. Higher foreign orders led to sustained growth in demand for n-butanol. In February, the Chinese New Year holiday caused many downstream plants to shut down or suspend operations. In March, following the holiday period, demand increased significantly and reached a peak. Thereafter, as n-butanol prices remained stubbornly high, major downstream sectors experienced clear and persistent profit losses. Consequently, from April onwards, these major downstream sectors began to gradually reduce their operating rates.
IV. N-butanol Cost and Profit Changes in the First Half of the Year
In the first half of 2026, the impact of domestic n-butanol costs and profits on its market prices became significantly more pronounced. From January to April, although domestic n-butanol faced high cost pressures, profit margins remained at relatively high levels. Starting from May, domestic n-butanol entered a loss-making phase for the first time, and the loss cycle lengthened, increasing the influence of raw material propylene price fluctuations on n-butanol market prices.
V. N-butanol Forecast for the Second Half of the Year
From the supply side, with new plants operating stably in the second half of 2026 and the completion of concentrated maintenance over the past two months, n-butanol units will gradually resume operations, leading to a gradual increase in supply. The domestic market will maintain an oversupply pattern. On the demand side, as the concentrated maintenance period in the first half concludes, plants will gradually resume production. Coupled with the launch of new production capacity into the market, demand for n-butanol is expected to increase incrementally.
Overall, as new n-butanol and downstream units are progressively completed and brought into production, and as the downstream market slowly enters a forgetful phase (likely meaning a less active season or a transition phase), the n-butanol market pattern will continue to shift towards an oversupply situation. With the easing of geopolitical tensions, international crude oil will lead propylene raw material prices back to more rational levels. However, propylene is still expected to remain at relatively high levels. Consequently, while n-butanol gross margins may improve somewhat in the second half of the year, loss-making operations for some plants are expected to occur frequently. The overall trend for the domestic n-butanol market in the second half of 2026 is expected to be a volatile downward movement, with ex-factory prices in Shandong ranging approximately between 5,500 and 7,000 RMB/ton.
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