Lead: Recently, the domestic n-butanol market has experienced a sharp decline in prices and fallen into a loss-making phase due to a significant drop in downstream demand, resulting in bleak market transactions. After hitting a low point, prices have remained range-bound at low levels.

I. Decline in n-Butanol Prices Slows Down

Since April, the domestic n-butanol market has been on a downward trend. Entering June, the pace of decline began to slow. The main factor behind the earlier price drop was downstream losses, compounded by the terminal market entering its off-season. The operating rates of key n-butanol downstream industries gradually decreased, leading to a notable reduction in demand for n-butanol. Market transactions were sluggish, and n-butanol producers faced blocked sales, rising inventories, and increasing sales pressure. As a result, they successively lowered ex-factory prices to stimulate the market, but the effect was unsatisfactory. The market maintained low just-in-demand procurement, with participants trading cautiously at low prices. After n-butanol prices hit a low in June, margins turned negative. Some major producers reduced operating rates, while plant maintenance shutdowns increased. However, producers still held high inventories, keeping spot supply ample. With phased downstream restocking and some factories receiving export orders, the oversupply situation was slightly alleviated, slowing the price decline and leading to a stabilization.

Table 1: n-Butanol Market Prices in Major Domestic Regions (USD/tonne)

| Product | Region | May 29 | June 5 | Change | Change (%) |
|-----------|--------------|--------|--------|--------|------------|
| n-Butanol | Shandong | 6785 | 6700 | -85 | -1.25% |
| | East China | 6850 | 6800 | -50 | -0.73% |
| | South China | 6775 | 6600 | -175 | -2.58% |
| | Henan | 7100 | 6600 | -500 | -7.04% |

II. Oversupply Situation for n-Butanol Persists

In mid-May, the domestic n-butanol operating rate dropped significantly. By early June, plant operating rates gradually recovered, increasing overall capacity utilization. Combined with high inventories from earlier poor sales, spot supply remained ample. Meanwhile, downstream sectors suffered heavy losses, and with the terminal market entering the off-season, plant maintenance shutdowns increased, leading to a marked decline in market demand, exacerbating the oversupply situation. However, after mid-May, some n-butanol factories received more export orders, consuming some inventories and easing the oversupply, thereby slowing the pace of price declines.

III. n-Butanol Prices Hit Bottom, Margins Remain Negative

Both feedstock propylene and n-butanol prices fell simultaneously, but the decline in propylene was smaller than that of n-butanol. n-Butanol suffered larger price drops due to market supply-demand imbalance and oversupply. Later, as n-butanol price declines slowed, margins recovered somewhat but remained negative. As of June 5, the n-butanol margin in Shandong was –442 RMB/tonne.

Table 2: Comparison of n-Butanol, Feedstock, Cost, and Margin Data (RMB/tonne)

| Item | Region | May 29 | June 5 | Change | Change (%) |
|--------------|----------|--------|--------|--------|------------|
| n-Butanol | Shandong | 6785 | 6700 | -85 | -1.25% |
| Propylene | Shandong | 9110 | 8950 | -160 | -1.76% |
| Cost | Shandong | 7241 | 7142 | -99 | -1.37% |
| Margin | Shandong | -456 | -442 | +14 | +3.07% |

IV. Market Outlook

Overall, the downstream sector is in its off-season. Due to weak terminal demand and high inventory pressure at factories, there are no signs of improvement in the short term. Downstream units are operating at low rates, limiting demand for n-butanol. Meanwhile, n-butanol supply remains ample, with the restart of maintenance units, the entry of new capacity, and high accumulated inventories from earlier poor sales, all increasing sales pressure on producers. However, with n-butanol margins deeply negative, the domestic n-butanol market is expected to undergo weak range-bound consolidation.