After n-butanol prices rose in September, relying on improving fundamentals, n-butanol prices remained strong in October. In the first half of the month, the market again hit a new high in the last two months, but resistance to the conduction of higher-priced butanol from downstream products emerged and the upside of intermediate n-butanol prices was blocked.

Around the National Day, the profitability of the n-butanol industry chain changed significantly and had a strong impact on the current price volatility. Before the National Day holiday, n-butanol prices were volatile, with an overall trend of rising and then falling. With downstream concentrated market purchases, n-butanol stopped falling and stabilized before the holiday. n-butanol industry chain prices continued to rise in October, supported by rising crude oil futures and high production and sales of downstream products. In the rapid rise in prices, the profitability of the n-butanol industry chain has also undergone significant changes, with a gradual imbalance in profit distribution. Among them, n-butanol profits gradually increased, while the profitability of downstream products fell to varying degrees.

Guided by multiple favorable factors, n-butanol prices and downstream products rose sharply around the National Day. In terms of upstream and downstream linkage, it can be roughly divided into two stages.

Benign phase of price increase conduction

In the benign phase of price conduction, the market price corresponding to Shandong n-butanol is between 6600-7300 yuan/ton. This stage has many positive factors, boosted market confidence, the industry chain to n-butanol price conduction more smoothly. The current industry benefits are concentrated in the following areas.

1. Inventory, following the continued accumulation of inventory in July-August, n-butanol prices fell sharply and industry inventories climbed to high levels.

2. Spot supply. Since September, Qilu Petrochemical, Tianjin Bohai Yongli, Lucy Chemical, Yanan Energy and other northern areas have appeared in varying degrees of production cuts, parking phenomenon, n-butanol inventory pressure weakened. In addition, the parking of Wanhua Chemical and Qilu Petrochemical equipment in October led to the expected gradual tightening of the future supply side.

During the holidays, the macro environment was improved and market confidence was boosted. Around the National Day, crude oil futures rebounded sharply, leading to a sharp rise in domestic chemical products and a boost in market confidence. In the above-mentioned atmosphere, n-butanol downstream purchasing activities gradually active, the industry chain has seen a simultaneous increase in volume and price, the profitability of each product to maintain a good state.

The conduction resistance of n-butanol price increase

As n-butanol prices continue to rise, especially in the north of the local supply constraints leading to local price increases, downstream products on n-butanol rising conduction resistance emerged. On the one hand, the market price deviation between the north and other regions, Shandong – East China arbitrage window closed; on the other hand, as n-butanol continued to rise, in the context of the fall in crude oil futures and weak sales of new orders downstream, butanol growth in the sales side has not been effectively transmitted.

During the current period in October, n-butanol’s high inventory at the beginning of the period coexisted with expectations of de-stocking. In the first half of the month, as n-butanol increased significantly, the willingness to take profits increased. In the Jiangsu market, for example, the willingness to take profits increased as n-butanol prices rose above 7,600 yuan per ton. From the perspective of commodity logistics, the northern region, led by Shandong, is a net outflow area for commodities. After the price of n-butanol rose to a relatively high level, the arbitrage window in Shandong-Eastern China gradually closed. Due to the lack of demand in East China, the commodity tension in Shandong region eased, and n-butanol prices increased resistance to the upside. Industry chain conduction is one of the key factors affecting the price trend of n-butanol. According to Zhuo Chuang information monitoring data, n-butanol industry chain profit distribution gradually deteriorated in mid-October. Compared with the pre-holiday period, n-butanol profits improved after the National Day, but the decline in downstream profits and weakening new orders had an impact on n-butanol prices and limited further price increases.

Dragged down by multiple negative impacts, n-butanol prices are more likely to fall back in the short term, but the rising costs in October have formed a positive support for n-butanol to some extent, and the short-term n-butanol price city may find it difficult to touch the August lows again.

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