Introduction: The domestic octanol market in China has experienced significant price fluctuations, with the highest price in Shandong reaching 9,400 RMB/ton in March. However, as prices climbed to high levels, downstream customers showed resistance, dragging down spot market prices. Due to supply shortages in other Asian markets, China, as a major octanol exporter, saw its export transaction prices surpass domestic levels.

1. Sharp Surge in International Crude Oil and Feedstock Propylene Prices

| Figure 1: Price Trends of Shandong Propylene and Octanol, 2025-2026 (RMB/ton) |
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| Data Source: chempricehub |

The escalation of tensions in the Middle East and disruptions in the Strait of Hormuz have hindered energy supplies globally, leading to significant price increases for international crude oil and chemical products. As of the close on March 26th, Brent crude reached $104.49 per barrel, a 44.1% increase from pre-conflict levels. By the close on March 27th, the market price for propylene in Shandong was 8,315 RMB/ton, up 1,905 RMB/ton (29.72%) from pre-conflict levels. The highest price for Shandong propylene in March reached 9,075 RMB/ton, substantially raising the cost line for octanol.

In early March, the price increase for octanol lagged behind the rise in costs, keeping industry profits in a loss-making state. The theoretical gross profit loss for octanol in Shandong reached around 330 RMB/ton at its worst in March. After mid-month, as octanol industry inventories declined, the price increase for octanol outpaced the rise in costs, leading to a significant improvement in product profitability.

2. Gradual Increase in Downstream Operating Rates, Domestic Demand Recovers to High Levels

| Figure 2: Monthly Operating Rate Statistics for Major Octanol Downstream Products |
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| Data Source: chempricehub |

Looking at the operating conditions of major octanol downstream sectors, plasticizer and 2-ethylhexyl acrylate plants operated at high rates in March. The profitability of downstream products was better than that of octanol, encouraging higher operating rates. Furthermore, downstream product orders were oversold, prompting customers to actively operate plants in March to fulfill earlier orders. Driven by rising raw material prices, end-users maintained consistent procurement. However, by late March, as octanol prices reached high levels, resistance from domestic end-users began to emerge. With sufficient inventories of low-cost raw materials built up earlier, end-users focused on consuming these reserves, making it harder to pass on high octanol prices downstream. Purchasing of spot octanol slowed, leading to slight decreases in operating rates at some plants. China's octanol consumption in March increased significantly by approximately 110,000 tons compared to February.

Comparison of Operating Rates: Octanol vs. Major Downstream Products

| Producer | February | March | Month-on-Month Change |
| :--- | :--- | :--- | :--- |
| Octanol | 96% | 91% | -5 percentage points |
| DOP | 53% | 66% | +13 percentage points |
| DOTP | 45% | 67% | +22 percentage points |
| 2-Ethylhexyl Acrylate | 68% | 77% | +9 percentage points |

3. Significant Increase in Export Orders

Following the escalation in the Middle East, energy supply tightness became more pronounced in other Asian regions. Expectations for octanol exports from the Middle East decreased, leading to supply shortages in Northeast and Southeast Asia. Consequently, China received a notable increase in foreign orders. This boosted demand in the Chinese octanol market and contributed to a rapid decline in industry inventories. As octanol prices surged significantly in Europe and America, China's export prices for octanol also exceeded domestic transaction prices.

4. Octanol Market Trading Range Expected to Narrow

| Figure 3: Octanol Supply-Demand Balance and Price Forecast (RMB/ton, 10k tons) |
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| Data Source: chempricehub |

From a cost perspective, feedstock propylene prices are expected to fluctuate at relatively high levels, providing support for the octanol market and limiting its downside potential.

Regarding supply and demand fundamentals, the octanol market remains strong. Domestic demand is stable, supported by contractual feedstock for downstream users who tend to purchase on dips and resist high-priced raw materials. With expectations of reduced octanol exports from the Middle East and continued tight supply in Europe and Asia, China is poised to serve as a major exporter to other regions. Export orders for Chinese octanol are expected to remain robust in April. Export transaction prices above 9,000 RMB/ton are likely to provide some support to the lower end of the domestic octanol market.

Overall domestic octanol supply is expected to increase, primarily due to the restart of previously idled plants and the anticipated stable operation of new units, although new unit operating rates are projected to be low. However, considering the overall supply-demand balance for octanol in April, industry inventories are forecast to continue declining slightly. The octanol market is expected to fluctuate between 8,200 and 9,200 RMB/ton in April.