Lead: This week, due to the easing of geopolitical tensions in the Middle East, international crude oil and propylene prices fell sharply. To reduce the risk of raw material price fluctuations in the later period, downstream buyers remained cautious in spot purchases of octanol, putting downward pressure on prices.

I. Cost-side drag opens downward room for octanol market

Domestic octanol producers, under earlier high cost pressures, had reduced operating rates at multiple plants or taken the opportunity to schedule maintenance shutdowns. In the first half of this month, the octanol market was supported by tightening supply, leading to only a narrow price increase. However, since the high cost of raw materials could not be effectively passed on to end-users, the decline in octanol prices accelerated this week. As of Thursday, ex-factory prices in the Shandong region had dropped to 7,700 yuan/ton, down 400 yuan/ton from the same period last week.

The main pressure driving the market downward came from the cost side: international crude oil and propylene prices fell significantly, releasing room for octanol margins to narrow. During the week, as the Middle East geopolitical situation eased, international oil prices and propylene prices moved down in tandem, exerting clear bearish pressure on octanol from both the macro perspective and the cost side. At the same time, some plants that had previously undergone maintenance are expected to gradually resume production, further strengthening bearish market sentiment. Downstream users showed weak purchasing willingness, only restocking spot octanol on a need-to basis, resulting in a subdued atmosphere for low-priced transactions overall.

II. Octanol spot costs shift from loss to profit

This week, the raw material propylene market in Shandong saw a broad decline, dragged down by falling international crude oil prices and its own supply-demand imbalances. As of Thursday, the closing price of propylene in Shandong was 7,300 yuan/ton, down 1,525 yuan/ton from the previous Thursday's close—the largest decline among all products in the octanol value chain.

Based on current spot propylene prices, the raw material cost for octanol in Shandong decreased by about 1,000 yuan/ton. However, the octanol market decline in the Shandong region was only 400 yuan/ton this week. Therefore, based on spot propylene prices, the theoretical profit margin for Shandong octanol expanded to 500 yuan/ton. Currently, the operating rate of the octanol industry remains at a moderate level, and some producers have no spot sales pressure, so plant ex-factory prices remain relatively high, limiting the extent of the market decline. At the same time, because contract propylene prices for octanol producers this month are relatively high, it is difficult for plants to quickly adjust their offer prices to keep pace with the drop in costs.

III. Supply-demand gap in octanol expected to widen next week

After the sharp decline in raw material propylene prices, spot octanol now enjoys a better profit margin. Driven by this, octanol plants have increased their willingness to raise production. Previously reduced octanol units are planning to increase operating rates, and two units in the Shandong region have startup plans. As a result, the supply of octanol is expected to increase significantly compared to this week.

Planned production increases for octanol plants next week

| Company Name | Operating Capacity (10,000 tons) | Unit Status |
|---------------------------|----------------------------------|--------------------------------------------|
| Tianjin Bohua Yongli | 14+14+45 | Three units at 70-80% operating rate |
| Shandong Jianlan | 21 | Shut down for maintenance on May 22; restart next week |
| Blue Sail Chemical | 14 | Shut down for maintenance on June 7; expected restart next week |

Although downstream plasticizer units have production increase plans, the overall operating rate of the industry remains at a moderate level. End-user purchasing sentiment is also affected by the decline in international crude oil prices, slowing raw material procurement. Cautious buying behavior constrains market transaction activity. According to downstream unit operating statistics, octanol consumption is expected to increase slightly next week. However, supply will exceed demand, leading to a small buildup in industry inventories and initiating price competition among octanol producers.

Octanol supply-demand balance forecast for next week (10,000 tons)

| Indicator | Current Period | Next Period Forecast | Change | Change % |
|-----------------|----------------|----------------------|--------|----------|
| Production | 5.94 | 6.45 | 0.51 | 8.59% |
| Capacity Utilization | 65% | 71% | 6 percentage points | - |
| Consumption | 5.93 | 6.17 | 0.24 | 4.05% |
| Supply-Demand Gap | 0.01 | 0.28 | 0.27 | - |

After the substantial decline in raw material propylene this week, the drop in propylene prices is expected to narrow next week. Octanol products have relatively good profit margins, and capacity utilization is expected to rise. However, there is still a lack of clear positive news to support the market in the later period, and merchants are mainly focused on reducing inventory. Moreover, with propylene prices falling to low levels, octanol products have room for further price concessions. It is expected that the octanol market will continue its downward trend next week. As octanol supply increases, downstream plasticizer users will purchase on a need-to basis. The market will continue to pay attention to the direction of international crude oil and raw material propylene prices for guidance on octanol market pricing.