Lead: As the US-Iran conflict continues, supply chain disruption risks have increased, and crude oil has pushed commodity futures prices higher. Domestic phthalic anhydride prices are once again challenging their year-high.
Cost-Side Drivers Push Phthalic Anhydride Prices Higher
Specifically, during this period, Jiangsu ortho-xylene-based phthalic anhydride prices first fell and then rose, with prices fluctuating in a range of RMB 9,250–9,500/mt; Hebei naphthalene-based phthalic anhydride prices increased, with prices fluctuating in a range of RMB 8,200–8,600/mt. During this cycle, domestic phthalic anhydride prices fell before staging a rebound, with cost-side factors serving as the main driver behind the market recovery. At the beginning of the week, expectations of increased supply from the ortho-xylene-based phthalic anhydride sector in South China suppressed market sentiment, putting domestic phthalic anhydride prices under pressure. However, amid the ongoing US-Iran conflict, international crude oil lifted commodity futures prices, creating a strong speculative atmosphere in the market. Robust cost support from the upstream aromatics chain—combined with a sharp rise in feedstock industrial naphthalene—strengthened cost-side momentum and enabled domestic phthalic anhydride prices to challenge the year's high once again. However, inadequate downstream end-user demand follow-through limited high-level transaction activity.
Recently, due to the persistently wide price spread between domestic ortho-xylene-based and naphthalene-based phthalic anhydride supplies, naphthalene-based phthalic anhydride has displaced a portion of ortho-xylene-based phthalic anhydride demand. Producers in the domestic naphthalene-based phthalic anhydride industry have generally been in an oversold position, and its relatively lower price compared with ortho-xylene-based material has made the naphthalene-based phthalic anhydride market the leading driver in each round of market rebounds. Since late August, the price spread between the two routes has narrowed, but it still remains at nearly RMB 1,000/mt. This substantial price differential provides strong support to the naphthalene-based phthalic anhydride market.
Demand from Major Downstream Sectors Declines
During the week, capacity utilization among major downstream sectors declined from the previous period, with operating rates falling for DOP, DBP, and UPR. China's unsaturated polyester resin operating rate was 32.5% for the week, down from the previous cycle. UPR plant operations declined slightly. A plant in Tianjin was shut down this week, resulting in a slight week-on-week decline in output. For the next period, taking into account recent maintenance and restarts, UPR capacity utilization in phthalic anhydride downstream is expected to decline, while DOP and DBP capacity utilization are expected to rise.
Table 1. Domestic Supply/Demand Balance (Unit: 10,000 mt)
| Data Category | Item | Current Period | Previous Period | Change | Next-Period Trend |
|---|---|---|---|---|---|
| Supply | Ortho-xylene-based PA output | 1.64 | 1.75 | -0.11 | ↑ |
| Naphthalene-based PA output | 2.49 | 2.49 | 0 | ↓ | |
| Total PA output | 4.13 | 4.24 | -0.11 | ↑ | |
| Demand | Domestic consumption | 3.85 | 3.95 | -0.10 | ↑ |
| Export volume E | 0.10 | 0.10 | 0 | ↓ | |
| Total demand | 3.95 | 4.05 | -0.10 | ↑ | |
| Supply-demand gap | Weekly theoretical balance | 0.18 | 0.19 | -0.01 | Absolute value to increase |
Data source: Chempricehub Information
During this period, phthalic anhydride supply declined. Operating rates fell for the ortho-xylene-based route and remained stable for the naphthalene-based route, lowering overall industry output and slightly reducing capacity utilization. Imports account for a negligible share, so weekly total supply is measured solely by domestic phthalic anhydride output, excluding imports. Among downstream consumption, DOP, DBP, and UPR consumption all declined, while exports remained steady; total consumption was assessed as lower. The supply-demand balance showed supply exceeding demand, but the balance gap narrowed from the previous week. This outcome was in line with earlier expectations. Supply-demand data provided limited support to the market, with downstream buyers replenishing only on a need-to basis and showing caution at higher price levels. Looking ahead to the next period, supply is expected to increase as restarts are likely to outnumber planned shutdowns, while downstream operating rates are also expected to rise. Theoretical supply is projected to exceed theoretical demand, and with the absolute value of the supply-demand gap trending upward, downward pressure on prices may emerge.
The phthalic anhydride supply-demand gap is expected to widen in the coming period, but cost-side factors suggest upward price momentum. Although cost-driven strength is building, the expected increase in ortho-xylene-based phthalic anhydride supply may pressure the market. Key points to monitor: 1. Supply. Overall phthalic anhydride operating rates are expected to rise next period, easing the tight supply situation to some extent; watch the release of additional ortho-xylene-based phthalic anhydride supply. 2. Demand. Operating rates in the major downstream plasticizer sector are expected to increase, with overall consumption projected to rise. 3. Cost. Costs for the ortho-xylene-based phthalic anhydride route are expected to remain broadly stable, though tight ortho-xylene supply keeps cost support strong; industrial naphthalene prices are projected to rise, strengthening costs for the naphthalene-based phthalic anhydride route.
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