Profits and demand continue to decline, driving the market price of n-butanol further downward.

Introduction: Recently, the domestic n-butanol market has been heavily influenced by the sharp fluctuations in feedstock propylene, affecting both cost-profit and supply-demand dynamics.

I. N-butanol price center continues to decline

Since the brief period of sideways consolidation in mid-June, domestic n-butanol market prices have resumed their downward trajectory. This decline has been relatively significant, primarily due to the impact of feedstock propylene. Initially, propylene market prices fluctuated downward, easing cost pressures. As the downstream sector entered its traditional off-season, demand dropped notably, reducing overall trading activity in the n-butanol market. However, unplanned plant shutdowns and reduced output among producers led to a slower price decline due to decreased supply. But as geopolitical tensions eased, crude oil prices fell sharply, pulling propylene prices down even further. The n-butanol market then entered a phase of continuous, substantial price drops. Although lower costs restored profitability, the market's bearish sentiment intensified, trading activity became sluggish, and rising plant inventories added pressure. By late June to early July, propylene prices surged due to supply constraints from increased plant shutdowns, pushing n-butanol back into losses. Meanwhile, after the prolonged decline, downstream buyers' willingness to accept low-priced n-butanol improved, slowing the pace of price falls.

Table 1: Domestic n-butanol market prices in major regions (RMB/ton)

II. Sharp fluctuations in feedstock, n-butanol profit reversal

In mid-June, as geopolitical disturbances gradually eased, propylene market prices accelerated their decline. N-butanol costs fell sharply, returning the product to profitability, while operating rates increased. However, market sentiment turned bearish, and downstream buyers became cautious, progressively reducing their purchasing appetite, which accelerated the downward adjustment of n-butanol prices. By late June/early July, propylene operating rates dropped significantly due to plant shutdowns, severely restricting supply. The market saw three consecutive days of sharp price increases, rapidly raising n-butanol costs and pushing the product back into losses. At the same time, after the continuous decline in n-butanol, low-price transaction volumes improved. As of July 2, the profit for n-butanol in Shandong was -683 RMB/ton, down 710 RMB/ton from June 16, a decrease of 2630%.

Table 2: Comparison of n-butanol, feedstock, and cost-profit data (RMB/ton)

III. n-Butanol remains in a supply-over-demand pattern

Supply side: Due to high feedstock propylene prices, n-butanol costs remained elevated, and losses persisted. As the downstream sector entered the off-season, operating rates also fell, resulting in weak overall market demand. Plant inventories rose due to sluggish sales, prompting some producers to halt or reduce output. Consequently, domestic n-butanol operating rates continued to decline, and supply kept shrinking, yet this provided only weak support to prices.

Demand side: Since entering the traditional off-season, coupled with high costs and losses among downstream players, operating rates for the three major downstream derivatives of n-butanol—butyl acrylate, butyl acetate, and DBP—declined. Among them, butyl acrylate saw a significant drop in operating rates and demand. Although butyl acetate and DBP maintained relatively good margins, weak end-user demand led to sales difficulties and inventory build-ups, increasing sales pressure. As a result, these producers also reduced operating rates, leading to a notable decline in n-butanol demand.

Overall, the domestic n-butanol market has recently experienced simultaneous declines in supply and demand. However, demand has fallen faster, keeping the market well-supplied. Despite some plants having export orders, domestic demand and purchasing willingness remained low, continuously pushing the price center downward.

IV. Market outlook

Supply side: In the later period, some domestic n-butanol plants are still scheduled for maintenance shutdowns. Although previously idled or reduced-capacity units will gradually resume production, the overall domestic n-butanol supply is expected to show a slight downward trend.

Demand side: The downstream sector is approaching its traditional peak season, and previously idled or reduced units will gradually resume operations. Among them, butyl acrylate and butyl acetate are expected to see more significant output increases, driving a substantial rise in demand and providing support to n-butanol market prices.

In summary, while feedstock propylene prices are expected to decline later, they will likely remain at elevated levels, keeping n-butanol under heavy cost pressure and losses. However, downstream butyl acrylate and butyl acetate operating rates are set to rise notably, leading to steady demand growth that outpaces supply gains. With increased plant shutdowns reducing n-butanol supply, coupled with export orders from some plants, domestic n-butanol market prices are expected to stop declining in the coming period.