[Industry Focus]：Chemical market weak operation, octanol market why profits remain high

Recently, many chemical products in China have risen to a certain extent, with individual products rising by more than 10%. This is a retaliatory correction after nearly a year of cumulative decline in the previous period, and it has not corrected the general trend of market decline. In the future, China's chemical products market will remain relatively weak for a long time.

Octanol is based on acrylic acid and syngas as raw materials, with vanadium as catalyst, to produce mixed butyraldehyde, through the mixed butyraldehyde refining to obtain n-butyraldehyde and isobutyraldehyde, and then shrink hydrogenation, through distillation, distillation and other processes to obtain octanol products. Downstream is mainly used in the field of plasticizers, such as dioctyl terephthalate, dioctyl phthalate, isooctyl acrylate, etc. TOTM/DOA and other fields.

The Chinese market is very concerned about octanol. On the one hand, the production of octanol with butanol and other products, belongs to a series of products, the market has a wide range of influence; two aspects, as an important product of plasticizer, has a direct impact on the downstream plastic consumer market.

In the past year, the market price of octanol in China has fluctuated greatly, ranging from 8650 yuan/ton to 10750 yuan/ton, with a range of 24.3. On June 9, 2023, the lowest price is 8650 yuan/ton, the highest price is February 3, 2023, and the highest price is 10750 yuan/ton.

In the past year, the market price of octanol has fluctuated greatly, but the maximum range is only 24%, which is significantly lower than the decline in the mainstream market. In addition, the average price of 9500 yuan/ton in the past year, the current market has been higher than the average price, which also shows that the overall performance of the market is stronger than the average level of the past year.

Figure 1 Price chart of China's octanol market in the past year (unit: RMB/ton)

source: Business

at the same time, due to the strong market price of octanol, the overall production profit of octanol is guaranteed to be at a high level. According to the cost formula of propylene, the Chinese octanol market has maintained a high profit margin in the past year. The average profit margin of China's octanol market is 29%, the highest profit margin is about 40%, and the lowest profit margin is 17%, from March 2022 to June 2023.

It can be seen that although the market price has declined, the production of octanol is still at a high level. Compared with other products, the profit level of octanol production in China is higher than the average level of bulk chemical products.

Figure 2 Change in profit of octanol in China over the past year (unit: RMB/ton)


source: Business

the reasons for the consistently high level of profitability in octanol production are as follows:

first, the reduction in raw material costs was significantly greater than for octanol. According to statistics, China's propylene fell by 14.9 from October 2022 to June 2023, while the price of octanol rose by 0.08. Therefore, the decline in raw material costs has allowed octanol to generate more production profits, which is the key reason to ensure that octanol profits remain high.

From 2009 to 2023, the price fluctuations of propylene and octanol in China are consistent, but the octanol market is larger and the propylene market is relatively conservative. According to the validity test of the data, the fitting degree of the price fluctuation of propylene and octanol market is 68.8, and there is a certain correlation between the two, but the correlation is weak.

As can be seen from the chart below, the fluctuation trend and amplitude of propylene and octanol are basically the same from January 2009 to December 2019. From the data fit of this period of time, the fit of the two is about 86%, and the correlation is strong. However, since 2020, octanol has risen significantly, which is significantly different from the fluctuation trend of propylene, which is also the main reason for the decline in the fit of the two.

From 2009 to June 2023, the price trend of octanol and propylene in China fluctuates (unit: RMB/ton)

source: Business

second, in recent years, the new capacity of China's octanol market is limited. According to relevant data, since 2017, there has been no new octanol equipment in China, and the overall production capacity has remained stable. On the one hand is the expansion of the scale of octanol, the need to participate in synthesis gas, which limits many new enterprises. On the other hand, the downstream consumer market is growing slowly, resulting in the supply side of the octanol market not being driven by demand.

Under the premise that China's octanol production capacity does not increase, the supply and demand atmosphere of the octanol market is relaxed, and the market contradiction is not prominent, which also supports the production profit of the octanol market.

The price trend from 2009 to the present, the price fluctuation range of octanol market is 4956 yuan/ton to 17855 yuan/ton, and the fluctuation range is huge, which also shows the huge uncertainty of octanol market price. From 2009 to June 2023, the average market price of octanol in China was 9300 yuan/ton to 9800 yuan/ton. The emergence of several inflection points in the past also illustrates the support or resistance of the average price of octanol to market volatility.

By June 2023, the average price of octanol in China will be 9300 yuan per ton, which is basically within the average market price range of the past 13 years. The low point of historical price is 5534 yuan/ton and the inflection point is 9262 yuan/ton. That said, if the octanol market price continues to fall, the low could be a support level for this downward trend. As the price rebounds and rises, its historical average price of 9800 yuan/ton may become a resistance level for its price increase.

From 2009 to 2023, the price trend of octanol in China fluctuates (unit: RMB/ton)

source: Business

in 2023, China will add a new set of octanol devices, which will break the record of no new octanol devices in the past few years, and is expected to increase the negative hype in the octanol market. Moreover, under the expectation of long-term weakness in the chemical market, the market price of octanol in China is expected to remain relatively weak for a long time, which may exert some pressure on profits at a relatively high level.