Introduction: As the terminal market enters the traditional demand slack season in June, downstream demand for DOTP is proving difficult to improve, resulting in lackluster market transactions. Industrial chain losses first emerged from the octanol segment in May and have now been transmitted downstream to the DOTP product end. Currently, octanol in Shandong is incurring a loss of 524 RMB/ton, while DOTP in Zhejiang posted a loss of 9 RMB/ton today, with an average weekly loss of 28 RMB/ton. Theoretical profits across the industrial chain are largely in a loss state.

1. Production Cuts Yield Limited Support; Octanol Industry Continues Loss Trend

Since late May, burdened by sustained losses, domestic octanol producers have successively implemented production cuts and load reductions to support prices. The overall industry operating rate has now fallen to 68%, hitting a low for the year. While the production cuts have provided some support to spot prices and encouraged sellers to tentatively raise quotes, the market-boosting effect has fallen short of expectations. Taking the Shandong market as an example, the average loss for octanol this week is 513 RMB/ton, narrowing by 66 RMB/ton from the previous week, but the industry remains deep in loss territory.

On the feedstock side, propylene prices are declining at a moderate pace, offering little significant downward room for cost relief. On the supply-demand front, a lack of substantial positive support, coupled with cautious downstream procurement, has slowed the pace of octanol price hikes. Overall, the room for octanol earnings recovery is narrow in the short term. Constrained by both feedstock and demand, the industry's loss-making pattern is expected to persist.

2. Terminal Slack Season Arrives; DOTP Cost Pass-Through Hindered

June to August is the traditional off-season for DOTP downstream demand, with multiple bearish factors jointly restraining demand release. First, high temperatures not only delay outdoor construction progress but also disrupt the production of downstream products, keeping the overall operating rate of DOTP terminal industries low. Second, in hot weather, sectors such as films tend to reduce the proportion of plasticizer added, further compressing the rigid demand for DOTP and other plasticizers. Third, market participants lack confidence in the outlook, adopting a "buy-as-needed" procurement strategy with no sustained restocking momentum, weakening demand-side support. More importantly, terminal orders are performing poorly. Under cost pressure, some downstream enterprises have switched to cheaper alternatives like crude DOTP, creating additional adverse impacts on DOTP demand.

On the supply side, the current DOTP industry operating rate stands at around 68%, which is at a medium level for the year but relatively high compared to the past three years. Although some mainstream plants in the Shandong region have scheduled maintenance shutdowns next week, which could lead to localized and temporary supply tightness, overall market supply remains ample. The pressure of sluggish new order intake is unlikely to ease for most enterprises in the near term. The ability of the DOTP industry to pass through costs remains limited, making profit recovery difficult.

3. Loss Dilemma in Slack Season Hard to Resolve

Looking at the monthly theoretical profit trends for DOTP from 2023 to 2026, the market has mostly been mired in loss territory during June-August over the years, with average monthly losses ranging from 10 to 160 RMB/ton. Entering June 2026, the DOTP industry has once again fallen into a loss-making situation. Taking the Zhejiang market as an example, the theoretical average loss for the DOTP industry this week is 28 RMB/ton, turning from profit to loss compared to the previous week, with a quarter-on-quarter profit decline of 137%.

Dragged down by losses and the bearish impact of the traditional slack season, DOTP producers have potential intentions to cut production going forward. However, constrained by practical factors such as ensuring the stable operation of core units and maintaining a stable workforce, it is difficult for enterprises to shut down and wait for long periods even as downstream demand continues to weaken. Against the backdrop of oversupply in the slack season, enterprises can only compete for limited orders by lowering prices. Intensified industry involution further squeezes profit margins, making it difficult to reverse the loss-making situation in the short term during the slack season.

4. Market Outlook

From the cost side, the raw material octanol industry remains under pressure from losses. Producers continue to support market prices through production cuts, providing a floor for octanol prices. For the other raw material, PTA, supply contraction expectations for its upstream raw materials, coupled with supply uncertainties arising from geopolitical volatility, offer some cost support for PTA. However, downstream polyester industry has plans for production cuts, capping the upside potential for PTA prices. Overall, the DOTP feedstock side provides some cost support, but the support is limited.

From the supply-demand perspective, localized tightening of DOTP supply provides support to spot prices. However, the terminal market remains in the demand slack season, with downstream players only making sporadic purchases for rigid needs. Buying interest for higher-priced cargo is weak, and follow-through buying lacks momentum, capping the upside for price increases.

The current DOTP market is in a delicate stalemate. Despite the pressure from losses, some sellers have recently attempted to alleviate operational pressure by narrowly raising quotes, giving prices a transient firm tone. However, this adjustment is more of a passive response to cost pressures. The market lacks substantive positive factors to sustain a continuous price rally. After most sellers adjusted their quotes, overall market transaction sentiment cooled down.

Based on the current market landscape, the DOTP market is unlikely to break out of its range-bound consolidation pattern, with price fluctuations expected to remain within a narrow band. Supported by costs and localized supply tightness, the market may hold firm in the short term. However, over the long term, sentiment among industry participants remains cautiously bearish. This is primarily because the fundamental market situation has yet to see substantial improvement, and the supply-demand imbalance remains unresolved. The contradiction between overcapacity and weak demand persists, coupled with cost uncertainties from raw material price fluctuations, creating significant headwinds for any subsequent upward price movement.