Raw materials drive strong cost increases, and the n-butanol market surges again.

Introduction: Driven by the sharp surge in international crude oil, feedstock propylene has risen strongly, reinforcing the high-cost support for n-butanol. At the same time, the market remains in a phase of tight supply. With this dual support, n-butanol prices have continued to climb.

I. N-Butanol Prices Fluctuate Upward with a Strong Bias

Recently, China's domestic n-butanol spot market has posted strong gains, driven mainly by cost and supply-demand factors. First, as international crude oil prices rose sharply, propylene — the feedstock for n-butanol — advanced continuously and substantially, breaking through the RMB 10,000 mark, which pushed n-butanol costs steadily higher. This not only strengthened cost-side support for prices but also stimulated greater buying interest among downstream players and market participants. Earlier, after a brief round of concentrated purchasing, downstream resistance to the higher n-butanol prices dampened buying interest and prompted consumption of feedstock inventories. As a result, downstream feedstock inventories are now low, and under the influence of the strong crude oil rally, buying interest has continued to improve, lifting inquiries and concluded deals in the n-butanol market. Meanwhile, maintenance units have not yet restarted, and producers are running with low inventories, leaving overall market supply tight. Supported by costs and supply-demand fundamentals alike, producers have repeatedly raised ex-works prices, purchasing interest has increased, trading activity has picked up, and n-butanol market prices have rebounded rapidly, with high-end prices continuously hitting new highs.

Table 1 Market prices of n-butanol in major domestic regions (RMB/mt)

II. Operating Rates Recover Slowly, Supply Remains Tight

As some of the previously idled units gradually restart, the overall operating load of China's n-butanol industry has risen, and market supply has increased accordingly. However, the restarted units are mainly used for captive consumption and contract deliveries, so the volume available to the spot market is limited. Combined with the fact that producers continue to hold low inventories, the n-butanol market remains in a tight-balance pattern in which supply falls short of demand.

III. Crude Oil Lifts Propylene, Sharply Raising N-Butanol Costs

Escalating geopolitical conflicts have pushed international crude oil prices higher, directly driving up feedstock costs across the propylene value chain, with propylene costs rising notably. At the same time, although the operating load of domestic propylene units is recovering slowly, most producers are still maintaining a low-inventory strategy, keeping overall spot supply tight. Supported by both higher costs and tight supply, the propylene market has continued to surge, with prices once breaking the RMB 10,000 threshold and setting new highs. The strong propylene rally has substantially raised the feedstock cost of n-butanol and steadily increased cost pressure on producers, providing solid support for the n-butanol market and keeping n-butanol prices at elevated levels.

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

IV. Market Outlook

On the supply side, units previously shut for maintenance are gradually restarting, and n-butanol supply in the domestic market is steadily recovering, easing the earlier tight spot-supply situation. On the demand side, downstream operating loads are expected to decline, and end-user purchasing demand may weaken somewhat, which would act as a drag on the market to a certain extent. That said, producers are currently operating with low inventories overall, leaving them with limited selling pressure and providing some support for n-butanol prices. On the cost side, although propylene prices have eased from their highs, they remain in a relatively high range, so the cost support for n-butanol production is still strong. Taking supply, demand and cost factors together, domestic n-butanol market prices are expected to remain range-bound at high levels.