Key Takeaway: Before the National Day holiday, China’s domestic high-temperature coal tar market experienced a "rollercoaster" trajectory, shifting from a sharp rally to a rapid decline. Regional transaction prices have cumulatively dropped by 1,200–1,500 yuan/ton from their peak. Although ethylene pyrolysis fuel oil (EPFO), as a homogeneous substitute, still benefits from cost support and tight supply fundamentals, it faces significant downward price pressure at the start of October. The core logic is that the comparative disadvantage relative to falling coal tar prices exerts direct downward pull, while deep losses in the carbon black industry trigger production cuts and price suppression, constituting the most certain bearish factor on the demand side. Amidst this bull-bear tug-of-war, EPFO is expected to see its price center shift lower in early October.
From August to mid-September, the domestic high-temperature coal tar market witnessed a remarkable surge. In Shanxi Province, auction transaction prices briefly hit a historical extreme of 6,810 yuan/ton. The primary driver behind this rally was persistent tightening on the supply side. While coke plant operating rates recovered slightly, they remained below levels seen in previous years during the same period. Additionally, some coking enterprises prioritized supplying their own captive units with produced coal tar, further reducing the volume available for commercial circulation.
However, irrational price increases inevitably face scrutiny regarding downstream absorption capacity. Market sentiment shifted abruptly in late September. By September 30, mainstream transaction prices for high-temperature coal tar in Shandong had retreated to 5,500 yuan/ton.
Carbon black serves as the core downstream sector for both high-temperature coal tar and EPFO. Given that carbon black accounts for a significant portion of EPFO consumption, the industry’s health directly transmits to EPFO demand.
The situation for the carbon black sector in September was dire. Coal tar prices surged by 2,200–2,270 yuan/ton within two weeks, translating to a cost increase of 3,000–4,000 yuan/ton for carbon black producers. Since many orders were placed previously when raw material prices were lower, the scissors gap between costs and selling prices widened sharply, pushing spot profits into deep deficit territory. Data from Chempricehub indicates that pre-holiday operating rates among sample carbon black enterprises fell to 56.67%, continuing their downward trend. Simultaneously, tire manufacturers’ capacity utilization declined, creating dual pressure on carbon black demand.
When carbon black plants resort to production cuts and price negotiations as bargaining tools, both coal tar and EPFO face the reality of shrinking demand. Overall buying sentiment remains temporarily passive, weakening fundamental support for both commodities. Purchasing will likely continue on an as-needed basis, making concentrated restocking unlikely.
As a homogeneous substitute for coal tar, EPFO competes directly with it in the carbon black feedstock sector. As coal tar prices plummeted rapidly from the high of 6,800 yuan to 5,500 yuan, EPFO’s comparative advantage eroded quickly. Downstream users tend to favor more cost-effective raw materials, meaning the drop in coal tar prices effectively closes off any room for EPFO to maintain firm pricing.
On the cost side, crude oil prices provide some support for EPFO. However, "support" does not equate to "upward momentum." If the price center of crude oil shifts slightly lower, the cost-support logic for EPFO will weaken accordingly.
Despite dominant downward pressure, there are still bullish factors supporting EPFO:
First, bottom-line support from crude oil. Due to its derivative nature, EPFO is sensitive to crude oil and naphtha prices. Although the expected price center for crude oil may shift slightly lower in October, low inventories and diesel shortages provide downside support for oil prices. Should geopolitical or supply-side disruptions emerge in the crude oil market in October, the cost-support logic for EPFO could strengthen intermittently, offsetting some downward pressure from coal tar.
Second, sustained contraction in EPFO supply. EPFO supply is constrained by the operational status of ethylene cracking units. The trend toward lighter feedstocks has reduced EPFO yields, and the tight supply landscape has not fundamentally changed. This scarcity may limit the depth of potential price declines.
Third, limited increase in high-temperature coal tar supply, leaving room for a possible rebound post-holiday.
Before the holiday, the first round of coke price reductions took effect. However, due to prior consecutive rises in coke prices, coking enterprise profits recovered significantly, leading to a slight uptick in industry operating rates. Currently, the coke market stands at the beginning of a negative feedback loop: "coking profit recovery → marginal supply expansion → erosion of end-user profits." Historical patterns suggest that when coking profits turn positive, supply elasticity releases rapidly. If steel mills do not simultaneously improve their profitability, coke prices struggle to maintain upward inertia. Price corrections become necessary to re-compress coking margins and force supply contraction, representing an inevitable process of profit rebalancing along the industrial chain. Therefore, although coking plant operations have recovered somewhat, full capacity release remains constrained by the availability of high-quality coking coal. Consequently, substantial increases in high-temperature coal tar supply in October are unlikely.
Supply-demand dynamics remain relatively tight. Furthermore, maintenance activities in deep-processing sectors and improved outlooks for downstream products are expected to boost the raw material coal tar market. Overall, the post-holiday coal tar market is predicted to experience a minor initial decline as prices normalize, without ruling out the possibility of a subsequent rebound.
Support from crude oil and supply constraints is insufficient to reverse the overall weak structure expected in early October. Production cuts and price suppression in the carbon black industry represent the most certain variable currently. Given EPFO’s substitutability with coal tar in carbon black formulations, it is difficult for EPFO to escape the downward shift in relative pricing. While the post-holiday coal tar market is expected to dip slightly before potentially rebounding, for EPFO, the immediate task is to absorb this initial "dip." Thus, EPFO’s follow-through decline is merely a question of magnitude, not direction.
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