Lead: At the beginning of the week, geopolitical risks intensified, driving up international crude oil prices. This, in turn, boosted the prices of upstream raw materials for DOTP such as isooctanol and PTA, rapidly heating up market sentiment for both risk aversion and bullishness. Contrary to the previously bearish outlook, the DOTP market staged a strong reversal, with prices experiencing a sharp rally. The price increase outpaced the rise in costs, gradually restoring theoretical profit margins for producers.
I. DOTP Prices Surge Strongly
This week, DOTP prices rallied against the pessimistic sentiment prevailing in the industry, with market trends significantly exceeding expectations. At the end of last week, DOTP trading activity had slowed. Market participants showed a strong inclination to book profits, leading to the release of lower-priced cargoes and spreading bearish sentiment. Upstream and downstream players generally held a cautious and pessimistic view of the short-term outlook.
However, the market hit a critical turning point on Tuesday. Overseas geopolitical risks escalated rapidly, triggering a substantial increase in international crude oil prices. The cost-driven impetus transmitted downstream along the chemical chain, completely reversing the trading sentiment in the DOTP market, with bullish sentiment quickly gaining momentum. End-users and traders engaged in concentrated restocking, significantly revitalizing market trading activity. The volume of transactions surged, effectively supporting the strong rally in DOTP spot prices.
Taking the Zhejiang region as an example, the mainstream ex-works quoted price for DOTP was 8,500 RMB/ton, up 450 RMB/ton or 5.6% from last Thursday. The average market price this week was 8,310 RMB/ton, up 460 RMB/ton or 5.9% week-on-week. This round of price increases was primarily driven by external macro-positive factors. Market expectations quickly shifted from bearish to bullish. Cost support combined with periodical restocking demand propelled a strong short-term price rebound.
However, this rally lacks sustained support from end-user essential demand. After prices surged, downstream buyers showed insufficient enthusiasm for chasing higher prices, leading to a rapid decline in new order placement and a lack of follow-through momentum. Currently, the market is characterized by a clear tug-of-war between bullish and bearish forces. Cost-side support remains, but demand continues to be weak, creating resistance for both upward and downward price movements.
II. Cost Support: Isononanol Prices Rise
At the beginning of the week, influenced by geopolitical risks, international crude oil prices rallied sharply, leading to a strong price surge for propylene, the main feedstock for isooctanol. Taking the Shandong region as an example, the price increase on Tuesday alone reached up to 595 RMB/ton. The weekly average mainstream transaction price settled at 8,850 RMB/ton, up 10.63% month-on-month. The surge in upstream propylene prices pushed isooctanol into deep losses. Under cost pressure, isooctanol operating rates declined further, prompting price increases. However, the price increase was smaller than the cost increase, resulting in a further expansion of losses for isooctanol this week. The weekly average loss reached 811 RMB/ton, widening by 84 RMB/ton or 11.55% from last week.
Today, crude oil prices declined. Weakening cost support combined with sluggish demand led to a generally bearish trading sentiment. Propylene prices stopped rising and fell back significantly. Consequently, losses for isooctanol producers are gradually narrowing. Taking the Shandong market as an example, the loss for isooctanol today was 538 RMB/ton. Meanwhile, trading of isooctanol at current price levels shows signs of weakening, suggesting insufficient momentum for further increases. The market awaits a drop in propylene prices to alleviate the loss situation.
III. DOTP Profit Margins Continue to Recover
The sustained surge in upstream propylene prices pushed isooctanol into a state of deep losses. The industry widely anticipated potential room for isooctanol prices to bottom out and rebound, which preemptively boosted bullish sentiment in the DOTP market, supporting price increases. However, end-user demand lacked sufficient positive drivers, causing the actual price increase of isooctanol to fall short of market expectations. The other key feedstock, PTA, saw its absolute price rise multiple times initially, driven by the crude oil strength. But suppressed by expectations of supply recovery, PTA prices generally opened high and moved lower, maintaining a range-bound consolidation pattern following the cost side.
Thanks to the speculative rally sentiment early in the week, the increase in DOTP spot prices significantly outpaced the increase in feedstock costs, leading to a continuous recovery in the industry's theoretical profit margins. Taking the Zhejiang region as an example, the theoretical profit for DOTP producers currently stands at 185 RMB/ton. The weekly average profit is 130 RMB/ton, an increase of 107 RMB/ton or a substantial 465.22% week-on-week, indicating a clear improvement in profitability. However, the fundamental lack of essential demand persists. Spot trading of DOTP remains generally sluggish. Most mainstream transactions were concentrated in the lower price range at the beginning of the week. Producers are primarily delivering previous lower-priced orders, while new orders at higher prices are difficult to secure. The weak demand-side situation has not yet improved, and the tug-of-war between costs and demand continues.
IV. Market Forecast
On the cost side, isooctanol market trading is gradually weakening, and the momentum for further price increases is insufficient. However, the industry as a whole remains in a state of deep losses. This loss pressure provides short-term support for spot quotations, helping merchants stabilize prices. If market transactions continue to weaken in the future, isooctanol prices may loosen, following the upstream cost side. The other feedstock, PTA, is trading in a narrow range following the cost of crude oil. The supply-demand structure in the industrial chain is relatively stable, and market inventories continue to decline. Going forward, attention should focus on changes in the geopolitical situation and the progress of plant maintenance and restarts. Overall, in the short term, the cost side can still provide some support for DOTP prices. However, bearish factors are gradually accumulating in the medium to long term, and the strength of this support is expected to weaken.
Supply and demand dynamics remain persistently weak. The downstream sector is currently in the traditional off-season for demand, generally maintaining only essential replenishment purchasing. Acceptance of high-priced DOTP cargoes is low, and the market is characterized by strong wait-and-see and stalemate sentiment, continuously suppressing upside potential. At the same time, industry operating rates are expected to increase next week, which will ease the current tightness in DOTP spot supply. Increased supply-side pressure will further weigh on the market.
In summary, the cost floor effect persists in the short term, providing some downside support for DOTP prices. However, transactions at high prices are sluggish. The tug-of-war between costs and demand is intensifying, and upward price resistance is prominent. As cost support gradually weakens in the future, the downside risk for DOTP prices will increase. At this stage, changes in the geopolitical situation remain the core risk variable influencing market trends.
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