Butane

n-Butane Market Intelligence Summary

1. Price Trends
- Domestic Market: n-Butane prices have recently shown a slight upward trend, with mainstream transaction prices ranging from 5,800 to 6,200 RMB/ton, representing a 2%-3% increase compared to the beginning of the month.
- International Market: CFR China prices in Asia remain stable at $780-820/ton. Prices in the European and American markets have risen slightly due to supply tightness, with European FOB prices increasing to $850-900/ton.

2. Supply Side Dynamics
- Domestic Capacity Utilization: Operating rates at major production enterprises are maintained at 75%-80%. Some refineries have reduced output due to routine maintenance, but no significant supply shortage has emerged overall.
- Import Status: Import volumes have decreased by 10% month-on-month, primarily because Middle Eastern sources are prioritizing contract customers, limiting the availability of spot market supplies.

3. Demand Side Dynamics
- Downstream Industries:
- Maleic Anhydride (MA): Operating rates have increased to 65%, boosting demand for n-Butane. However, procurement remains focused on essential needs, with low willingness to stockpile.
- MTBE (Methyl tert-Butyl Ether): Driven by gasoline blending demand, MTBE plant operating rates remain stable at 70%, keeping n-Butane consumption flat.
- Chemical Feedstock: Some enterprises use it for producing acrylic acid and esters. Demand growth is limited due to sluggish end-market conditions.
- Seasonal Factors: Northern regions have entered the heating season, increasing demand for civil liquefied gas. However, n-Butane, as an industrial feedstock, is minimally affected by diversion to the civil market.

4. Inventory Levels
- Port Inventory: Total port inventories in East and South China are approximately 120,000 tons, down 15% from the previous month, remaining at medium-to-low levels.
- Manufacturer Inventory: Inventory pressure at major production enterprises is manageable, with some firms having pre-sale orders scheduled through mid-December.

5. Cost and Profit
- Feedstock Prices: International crude oil prices have risen in a volatile manner, with Brent crude stabilizing above $85/barrel, strengthening cost support for n-Butane.
- Production Profit: At current prices, the production profit for n-Butane at refineries is approximately 200-300 RMB/ton, showing slight improvement compared to the previous month.

6. Related Product Linkages
- Liquefied Petroleum Gas (LPG): Civil gas prices continue to rise, widening the price differential with n-Butane to 800-1,000 RMB/ton. Some industrial users are shifting to alternative feedstocks.
- Propane: Propane prices have risen due to strong winter demand, narrowing the price differential with n-Butane and weakening the substitution effect.

Analysis and Judgment
1. Short-Term Drivers:
- Supply: Reduced imports combined with the domestic maintenance season will sustain a tight supply landscape.
- Demand: Increased operating rates in the maleic anhydride industry support demand, but sluggish end-markets limit room for growth.
- Cost: High-level crude oil prices provide strong cost support.

2. Market Contradictions:
- The trade-off between low inventory levels and insufficient demand growth expectations limits upside price potential.
- Price fluctuations in substitutes (such as propane and civil gas) impact market sentiment for n-Butane.

Price Forecast
1. Short-Term (1-2 Weeks):
- Prices are expected to maintain a strong, volatile trend, with mainstream transaction prices potentially reaching 6,300-6,500 RMB/ton, although breaking previous highs will be difficult.
- Risk Factors: A sharp drop in crude oil prices or a decline in operating rates in the maleic anhydride industry.

2. Medium-Term (1 Month):
- With the onset of pre-Spring Festival stocking demand, prices may experience a phased increase, though the magnitude will be constrained by the strength of end-market recovery.
- Prices are projected to move into the 6,400-6,700 RMB/ton range from late December to early January.

3. Long-Term (3 Months):
- If international crude oil prices remain at high levels, cost support for n-Butane will be reinforced. However, caution is needed regarding negative feedback caused by compressed profits in downstream industries.
- Prices in Q1 2024 are expected to follow a pattern of initial rise followed by a decline, with the peak likely occurring in mid-to-late January.

Key Points to Monitor
1. Crude oil price fluctuations and the implementation status of OPEC+ production cut policies.
2. Changes in operating rates and new capacity commissioning progress in the domestic maleic anhydride and MTBE industries.
3. Import arrival volumes and adjustments to supply policies in the Middle East.
4. The impact of extreme winter weather on logistics and downstream operating rates.