Summary: Recently, domestic n-butanol prices have been consistently declining. This downturn is primarily attributed to a shift in the market's supply-demand dynamics, leading to a state of oversupply. While production costs offer slight support, prices remain under pressure.

1. Continuous Decline in the n-Butanol Market

Since early April, domestic n-butanol market prices have started a downward trend. The main driver for this decline is the change in market supply and demand. On the supply side, production rates at factories have recovered, steadily increasing market availability. Concurrently, the completion of export orders has boosted the supply for the domestic spot market. On the demand side, since April, the operating rates of major downstream sectors have been gradually declining, significantly reducing their demand for n-butanol. Furthermore, the pre-May Day holiday stocking sentiment has been weak. Consequently, inquiries and purchase intentions in the domestic n-butanol market have been poor, leading to subdued overall trading activity. Production plants faced difficulties in selling goods, causing their inventories to rise. Needing to destock before the May Day holiday, producers continuously offered price concessions to stimulate sales, despite high production costs. Market low prices kept falling, and transactions were mostly concentrated in the lower price ranges. As of April 24th, the ex-factory price in the Shandong region had fallen below 8,000 RMB/ton to 7,600-7,800 RMB/ton; in the East China region, prices were at 7,800-7,850 RMB/ton.

2. Market Shifts to Oversupply as Supply Increases and Demand Weakens

Recent domestic n-butanol supply has increased alongside the gradual restart of production units. Since the start of April, Shuguang's n-butanol unit was restarted, Sichuan Petrochemical increased its operating rate, and Ningxia Jiuhong, after a brief production cut, ramped up to 70% capacity. Domestic n-butanol supply has progressively increased, with the weekly output rising from 51,100 tons at the end of March to the current 54,200 tons, an increase of 3,100 tons. Conversely, downstream demand has shown a declining trend. The weekly operating rate for butyl acrylate dropped from 69.65% at the end of March to 61.4% currently, a decrease of 8.25 percentage points, the largest decline among major downstream sectors. Butyl acetate saw its rate fall from 49.48% to 45.5%, a drop of 3.98 percentage points. DBP's operating rate decreased from 67.4% to 65.76%, a decline of 1.64 percentage points. Apart from decreased domestic demand, export orders have been largely fulfilled by production plants, and no new significant orders have been reported. Therefore, foreign demand by the end of April was lower than during the mid-to-early part of the month. This shift has pushed the domestic n-butanol supply-demand balance towards oversupply, putting continuous downward pressure on prices.

3. Fluctuating High Propylene Prices Increase n-Butanol Cost Pressure

The raw material, propylene, is heavily influenced by international crude oil prices. Additionally, as propylene operating rates continue to decline, the overall supply is tightening, providing some support to propylene prices and keeping them in a high-range fluctuation adjustment. However, due to the changing supply-demand dynamics for n-butanol, market trading volumes have shrunk. Facing stock accumulation from sluggish sales, production plants have repeatedly cut their ex-factory prices. Consequently, the decline in n-butanol prices has outpaced the decline in raw material (propylene) and overall production costs. This has compressed n-butanol profit margins. As of April 24th, the daily gross profit for n-butanol was approximately 341 RMB/ton, a decrease of 1,141 RMB/ton from March 31st, representing a drop of 76.99%.

4. Future Outlook

Supply: Several production plants have announced planned maintenance schedules. Both Shaanxi Yanchang and Shuguang have maintenance plans in May, which will reduce domestic n-butanol supply.

Demand: Major downstream sectors for n-butanol are expected to slowly enter their off-season. Coupled with the upcoming completion of export orders and no signs of improvement in the domestic end-user market, the operating rates of major downstream industries are predicted to have further room for decline. Consequently, demand for n-butanol is also expected to weaken.

Overall: With the May Day holiday approaching, the market's stockpiling sentiment remains lackluster. Overall downstream activity stays subdued, with purchasing focused on rigid, opportunistic buying at low prices. There are no signs of improved market trading sentiment. Production plants are finding it difficult to improve sales. Considering inventory pressures before the holiday, the supply-demand contradiction is expected to intensify further. Therefore, it is predicted that domestic n-butanol market prices may still have slight room for further decline in the near term.