Lead: New capacity for butanol (n-butanol/2-ethylhexanol) was brought online domestically in April, and has been operating stably this month. The resulting oversupply in the butanol market has become evident, driving declines in industry operating rates, prices, and profits, while also shifting market participants’ trading psychology.

1. New capacity runs stably; industry operating rate declines

In May, new capacity in both North China and South China has been running stably, pushing monthly operating capacity to 410,000 tons—an increase of approximately 50,000 tons per month compared to the start of the year. Under normal conditions, monthly butanol consumption stands at 330,000–350,000 tons. Based on supply and demand, this indicates a surplus of 60,000–80,000 tons. The oversupply has forced down operating rates at domestic plants. Under the dual pressure of spot sales and costs, multiple units have reduced loads, with the industry operating rate falling to 85% in the first half of the month. This week, the average industry operating rate is around 82%, representing medium-to-high load operation. Some plants plan to shut down for maintenance in the second half of the month, which could push the operating rate below 80%.

2. Oversupply sharply suppresses butanol prices and profits

On the cost side, the main feedstock propylene saw a decline at the end of last week, but has since moved sideways this week. On Friday, Shandong propylene was at 9,205 yuan/mt, down only 20 yuan/mt from the start of the week. Cost support failed to stabilize butanol; instead, the butanol market has accelerated its downward movement this week. On Friday, the Shandong ex-factory price fell to 8,200 yuan/mt, down 650 yuan/mt from the previous Friday, a decline of 7.34%. Based on current spot propylene and butanol prices, butanol producers are losing 372 yuan/mt, marking the second time since 2026 that the product has fallen into losses. Propylene prices in East China are higher than in Shandong, while the price spread between East China butanol and Shandong butanol is relatively narrow, making the cost inversion in East China even more pronounced.

3. Ample supply shifts participants’ trading rhythm

For producers, intense competition among companies in spot sales has led most to maintain low inventory levels, as they aim to avoid greater sales and inventory pressure from rising supply later. Downstream buyers, facing ample feedstock availability, have shortened their spot procurement cycles and reduced purchase volumes, buying only small amounts on an as-needed basis. Since end-user demand is lackluster, downstream customers are sourcing spot butanol only in line with their own sales.

Looking ahead to next week: Cost pressure remains significant, and some units are scheduled for maintenance. At the same time, previously offline units have restart plans. Overall, butanol supply next week will be lower than this week, easing spot sales pressure and competition. Downstream plasticizer products still have room for profit, with units operating at medium loads, so downstream users will continue to purchase spot butanol as needed. Traders are mainly taking orders and executing shipments. Market negotiation ranges for butanol are expected to narrow next week.