Introduction: Ongoing geopolitical tensions in the Middle East continue to drive international crude oil prices higher, pushing up commodity futures market prices. Coupled with expectations of reduced production at ortho-xylene plants, ortho-xylene prices have risen further. Driven by cost factors, the phthalic anhydride market has seen its price center continue to climb.

Cost-Driven Surge in Phthalic Anhydride Market Prices

In detail, prices for ortho-xylene-based phthalic anhydride in Jiangsu increased this period, with a fluctuation range of 9,100-9,500 RMB/ton. The naphthalene-based phthalic anhydride market in Hebei fluctuated between 8,050-8,400 RMB/ton. During this period, domestic phthalic anhydride prices were pushed higher. The rise in raw material ortho-xylene prices, driving up costs for ortho-xylene-based phthalic anhydride, remained the primary factor for the market increase. A decline in ortho-xylene supply, exacerbated by expectations of plant maintenance, intensified supply tightness. Driven by these cost factors, domestic phthalic anhydride prices were pushed up. With the persistent high price gap between ortho-xylene-based and naphthalene-based phthalic anhydride supplies, some downstream users of ortho-xylene-based product were forced to switch to naphthalene-based phthalic anhydride, putting pressure on high-priced sales of the ortho-xylene-based material. However, as naphthalene-based phthalic anhydride industry inventories are generally oversold until mid-April, the high-end phthalic anhydride market is showing divergence.

Phthalic Anhydride Industry Chain Profits Concentrated Upstream

This period, the average weekly comprehensive profit for ortho-xylene was 540 RMB/ton, an increase of 20 RMB/ton (up 3.85%) from the previous period. Profits for ortho-xylene-based phthalic anhydride were 201 RMB/ton, up 109 RMB/ton (118.48%). Profits for naphthalene-based phthalic anhydride were 1,387 RMB/ton, an increase of 299 RMB/ton (27.48%). Industry chain profits this period showed a concentration upstream, with some divergence. Upstream ortho-xylene profitability increased, as did profits for both ortho-xylene-based and naphthalene-based phthalic anhydride sectors. Among downstream products, DOP industry profits declined, while UPR industry profits shifted from profit to loss. The recent price increase of phthalic anhydride has raised cost pressures for downstream sectors, although downstream markets have also shown a rebound, resulting in significant differences in downstream profitability levels.

Phthalic Anhydride Industry Supply Growth Expected, but Demand May Weaken

This period, phthalic anhydride supply remained stable. Ortho-xylene-based phthalic anhydride saw a slight decline, while naphthalene-based phthalic anhydride industry operating rates increased. Overall industry output and capacity utilization remained stable. The import volume share is almost negligible, so weekly overall supply assessment no longer considers imports, relying solely on phthalic anhydride production volume. In terms of downstream consumption, DOP consumption was stable, DBP consumption was stable, UPR consumption increased, and exports grew. Overall consumption is assessed as increased. The supply-demand balance showed oversupply, though the balance gap narrowed compared to last week. The supply-demand balance within the period aligned with prior expectations, with supply-demand data providing some support to the market. However, downstream demand consumption declined, with resistance to following up on new high-priced orders, leading to obstacles in high-end market transaction follow-through.

Looking at the next period forecast, market supply is expected to increase as more plants resume operations than the number of units expected to undergo maintenance. On the consumption side, downstream plant operations are expected to decline slightly. Theoretically, supply is expected to exceed demand, and the absolute value of the supply-demand balance gap shows a trend of increasing, which will impose some constraints on prices.

It is expected that the supply-demand gap for phthalic anhydride production and sales will widen in the next period. However, with strong cost support for ortho-xylene-based phthalic anhydride, its price may trend slightly weaker, while the naphthalene-based phthalic anhydride market is expected to move sideways.

Key Focus Areas:

1. Supply Side: Overall operating rates in the phthalic anhydride industry are expected to increase next period, with supply pressure for ortho-xylene-based phthalic anhydride rising in some regions.
2. Demand Side: Affected by expectations of a slight weakening in downstream operations next period, downstream industry demand is expected to decline, leading to an overall expected reduction in consumption.
3. Cost Side: Cost support for raw material ortho-xylene-based phthalic anhydride is expected to remain stable, with strong cost support from the ortho-xylene-based phthalic anhydride industry. Raw material industrial naphthalene is expected to move sideways, providing insufficient cost support for the naphthalene-based phthalic anhydride industry.