Lead: Amid ongoing geopolitical tensions in the Middle East, international crude oil prices have once again risen, driving up prices in the chemical futures market. Domestically, the phthalic anhydride (PA) market has experienced a significant price surge due to low supply and low inventory.
Low Inventory Drives Phthalic Anhydride Market Prices Higher
Specifically, during this period, the price of ortho-based PA in Jiangsu rose, with a fluctuation range of 8,600–9,400 RMB/ton; the price of naphthalene-based PA in Hebei also increased, fluctuating between 8,000–8,500 RMB/ton. This cycle saw a rebound in domestic PA market prices. With low industry inventories and the upward impetus from crude oil prices, the domestic PA market price increase widened. Following earlier concentrated restocking by downstream users, the domestic PA industry generally oversold its inventories. Combined with a low capacity utilization rate in the PA industry, the tight supply situation remains difficult to alleviate. Driven by rising cost-side factors, the market atmosphere is ripe for speculative price hikes, allowing the upward momentum of domestic PA prices to continue expanding.
Tight Supply of Raw Material Ortho-Xylene Remains Difficult to Alleviate, Suppressing PA Industry Capacity Utilization
Due to concentrated plant maintenance, the domestic ortho-xylene (OX) industry's capacity utilization rate is at a historically low level. Although the anticipated ramp-up of production at Yulong Petrochemical's unit and the restart of Fujia Dahua's unit are expected to boost OX capacity utilization to some extent, if Yulong's unit ramps up in August and Fujia Dahua's unit operates normally, the domestic OX capacity utilization rate is projected to reach 50%, an increase of about 4% compared to July. However, the OX industry's capacity utilization rate will still be at historically low levels in recent years, making it difficult to ease the tight spot supply situation. There is virtually no market-circulating spot supply, and the market remains largely under strong control. Moreover, with the continuous rise in international crude oil prices, cost support from the upstream aromatics chain is strong. Combined with the strong upward movement of the major downstream PA market, demand-side support is robust. Given the widening price spread between OX and PA and the extreme scarcity of OX, OX prices may still face upward pressure.
Improved Demand Side Supports Market Strength
Affected by Middle East geopolitical conflicts, international crude oil has driven a sharp rise in commodity futures market prices, creating a speculative market atmosphere. This has also led to improvements in downstream demand-side products. Notably, the capacity utilization rate in the major downstream plasticizer industry has increased significantly, providing strong support for PA market demand. The capacity utilization rate for the key downstream DOP has risen markedly, reaching 64% this week, a 6% increase from the previous period, with output rising 9.7% month-on-month. Downstream DBP capacity utilization reached 50.72%, an increase of 5.37%, with weekly output of 9,600 tons. Shandong Weijiao's unit has resumed production. The UPR sector remains stable. China's unsaturated polyester resin (UPR) weekly operating rate was 34%, with overall capacity utilization essentially flat compared to the previous period. UPR plant operations are generally stable but slightly weak. Specifically, a unit in Anhui maintained stable production, but a unit in Tianjin underwent a short-term shutdown, while two units in Shandong operated at reduced loads. These output increases and decreases offset each other, resulting in a generally stable supply structure.
Outlook for the Next Period
The supply-demand balance for PA production and sales is expected to narrow in the next period. However, with low domestic PA industry inventories and expectations of cost-side upward pressure, domestic PA market prices may continue to rise, potentially hitting new highs for the year. Key points to watch: 1. Supply side. The overall PA industry operating rate is expected to increase in the next period, but the overall industry operating rate remains low, limiting supply pressure. 2. Demand side. The operating rate of the major downstream plasticizer industry is still expected to increase, supporting overall consumption growth. 3. Cost side. The cost of raw materials for ortho-based PA is expected to rise, strengthening cost support for the ortho-based PA industry. The average weekly price of industrial naphthalene, a raw material, is also expected to rise, increasing cost expectations for naphthalene-based PA.
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