[Preface] This year, paint demand has declined noticeably, with subdued downstream demand for C5 petroleum resin becoming more pronounced during the off-season. Meanwhile, a significant drop in C5 petroleum resin supply and stable raw material prices have left limited room for price declines in negotiations.

1. Cracking C5 and Isoprene Prices Remain Stable

This week, the price of cracking C5 in North China fell by 100 to 5,550 yuan/ton, in East China it dropped by 100 to 5,500 yuan/ton, in Northeast China it ranged between 5,200 and 5,370 yuan/ton, and in South China it decreased by 100 to a range of 5,350–5,500 yuan/ton. Some private sector prices fell to between 5,100 and 5,370 yuan/ton. Isoprene remained stable at 6,950–8,000 yuan/ton. Consequently, cost pressures on C5 petroleum resin producers remain high.

2. C5 Petroleum Resin Supply Remains at Low Levels This Week

Industrial cracking C5 output this week was largely flat compared to last week, with production reaching 74,400 tons. However, C5 petroleum resin supply stood at 7,600 tons, corresponding to an operating rate of 58.81%. Output has been declining steadily since early December last year, down 24% from the 82.3% operating rate seen throughout 2025. The main reasons include ongoing maintenance at some production facilities and significant price volatility in cracking C5, which has led to notable adjustments in downstream offtake. Additionally, downstream demand has remained at low levels, and poor sales of C5 petroleum resin have further dampened production incentives.

From an inventory perspective, despite concentrated bearish sentiment among end users, the decline in C5 petroleum resin output has not led to a significant buildup in inventories. Stock levels are generally at a two-year low.

Table 1: C5 Petroleum Resin Production and Sales Balance Sheet

| Data Type | Data | Current Period | Previous Period | Change | Next Period Trend |
|---|---|---|---|---|---|
| Road Marking C5 Petroleum Resin | Output | 3.4 | 4.1 | -0.7 | ↓ |
| | Inventory | 10.8 | 11.1 | -0.3 | ↓ |
| | Consumption | 3.7 | 3.96 | -0.26 | ↓ |
| Adhesive C5 Petroleum Resin | Output | 4.2 | 4.1 | 0.1 | ↑ |
| | Inventory | 24.71 | 23.36 | 1.35 | ↑ |
| | Total Demand | 2.85 | 2.14 | 0.71 | ↑ |

From a consumption perspective, supplier shipments have dropped sharply. June is the off-season for consumption, and while it is difficult to fully absorb supply, the decline in consumption volume is also limited. The basic consumption level remains relatively acceptable.

In summary, during the second half of June, domestic downstream users of C5 petroleum resin may face phased restocking, leading to an increase in replenishment volumes. Additionally, demand from overseas markets is expected to recover in July and August, suggesting a gradual improvement in overall demand. However, hot-melt coatings will continue to be constrained by limited on-site construction activity, making a significant recovery unlikely. Overall, production and sales are expected to approach balance. In an optimistic scenario, inventories may see modest digestion, and downward pressure on C5 petroleum resin prices will slow noticeably.