Introduction: This week, the domestic DOTP market saw a significant acceleration in its downtrend, with price declines widening. Taking the Zhejiang market as a reference, on June 18, the local DOTP ex-factory price was reported at 8,700 yuan/ton, down 400 yuan/ton from June 11, a decrease of 4.4%. The complete collapse of upstream feedstock cost support, combined with bearish factors from the traditional off-season for downstream demand, continued to drag the DOTP market downward.

I. N-octanol Returns to Profitability, Creating Significant Room for Price Concessions

The profit margin of feedstock n-octanol has recovered rapidly recently, with the industry turning a profit and expanding its profit margin. Taking the Shandong market as an example, as of June 17, the theoretical profit for n-octanol producers reached 500 yuan/ton, a significant increase of 698 yuan/ton compared to last Thursday.

The core driver behind this notable profit recovery for n-octanol is the sharp decline in upstream propylene prices. In mid-June, there was a clear reversal in the Middle East situation, with the US and Iran reaching an agreement to cease hostilities. The US side confirmed it would lift relevant blockade measures against Iran, and Iran may open up shipping through the Strait of Hormuz. Geopolitical tensions have eased significantly, rapidly deflating the risk premium previously built into the crude oil market due to geopolitical conflicts, causing international oil prices to fall. Dragged down by the decline in crude oil, cost support for propylene weakened. Furthermore, multiple propylene plants that were undergoing maintenance have recently restarted production, leading to a continuous increase in market supply. These dual bearish factors pushed propylene prices down deeply. As of June 18, the reference price for propylene in Shandong was 7,300 yuan/ton, down a cumulative 1,525 yuan/ton from June 11.

In contrast, previous low operating rates in the n-octanol industry meant producers had no inventory pressure. The decline in n-octanol product prices was far less than that of feedstock propylene, leading to a rapid recovery in industry profitability. Improved profitability has increased the willingness of previously idled plants to resume operations, raising expectations for future supply increases. The market supply-demand balance for n-octanol is expected to shift from a tight balance to oversupply. Currently, n-octanol producers have ample profits, leaving significant room for price concessions and reductions. This pessimistic sentiment regarding feedstock costs has been transmitted downstream, dragging down the DOTP market in advance.

II. Crude Oil Declines Sharply; PTA Weakens in Tandem

Driven by geopolitical factors this week, the PTA market price decline accelerated, with the weekly average price at 6,165 yuan/ton, down 371 yuan/ton from the previous week, a decline of 5.68%. On Thursday, the East China spot market closed at 6,045 yuan/ton, down 540 yuan/ton from last Thursday. On the cost side, the easing of geopolitics led to a significant drop in crude oil, dragging down the industry chain's feedstock costs. Additionally, expectations of further interest rate hikes by the Federal Reserve within the year added further pressure, undermining costs. On the supply-demand side, real demand remains weak, with polyester operating rates below 80%. However, current processing fees in the industry are at a healthy level, and there are expectations of destocking in both supply and demand downstream in the industry chain. During the week, the market mainly moved lower, driven by the combined bearish impact of geopolitics and costs. After the phased bearish factors were sufficiently released, expectations of healthy destocking in the distant supply-demand cycle drove a price recovery towards the end of the week.

III. Dual Pressure from Supply and Demand; DOTP Prices Under Pressure

Driven by the significant drop in feedstock costs, the theoretical profit for the DOTP industry recovered significantly this week, officially reversing the loss-making situation. Taking the Zhejiang market as an example, the current theoretical profit for DOTP is 47 yuan/ton, up 103 yuan/ton from the same period last week. This profit improvement directly boosted producers' willingness to operate. Previously idled units for maintenance have resumed production, and some shutdown plants are also planning to restart soon. The overall industry capacity utilization rate has risen to 58%. There is still room for further supply increases. Post-holiday operating rates are expected to continue rising, with projections suggesting the industry operating rate could reach around 69% by the end of this month. Expectations for market supply increases are rising.

In contrast to the continuous supply recovery, downstream end-user demand shows no signs of improvement. The current period is the traditional off-season for demand. Producers of downstream products have few new orders and hold a pessimistic outlook for the near-term market. Purchases are limited to small quantities for essential needs, with weak willingness for bulk stocking. On-site spot transactions struggle to gain volume.

On one hand, supply is increasing due to higher operating rates. On the other hand, end-user procurement remains persistently weak. The contradiction of oversupply in the DOTP market is gradually becoming prominent. Holders of cargo have a strong desire to sell. To stimulate transactions, they are actively lowering their quotations. Low-priced cargo keeps emerging in the market, putting the market under persistent pressure.

IV. Market Outlook

From the cost perspective, the n-octanol industry has seen a significant profit recovery, achieving an overall turnaround to profitability. Combined with expectations of increased supply next week, producers have ample room for price cuts and concessions. The other feedstock, PTA, is seeing a gradual market recovery after its earlier sharp decline. Tightening supply expectations for upstream PX provide cost support, while end-user inquiry sentiment has slightly warmed up, which could underpin a stronger, consolidating trend for PTA prices. Overall, the feedstock side for DOTP presents a mixed picture of bullish and bearish factors. The key raw material, n-octanol, has a downward price expectation, which will be the main factor dragging the DOTP market down. However, the price support from PTA will constrain the downside potential for DOTP.

On the supply-demand front, the downstream industry is currently in the traditional off-season for demand, and inquiry sentiment in the DOTP market has not shown significant improvement. Although there might be some phased restocking for essential needs at lower prices after the holiday, the volume of such downstream replenishment will be limited, preventing sustained transaction activity. This will continue to exert pressure on DOTP spot prices.

In summary, bearish factors currently dominate the DOTP market. Market participants hold a cautious outlook. New order discussions are light, and the overall market is under pressure. However, the presence of slight bullish factors on the feedstock side will limit the extent of price declines.