Lead: This week, expectations of shipping transits through the Strait of Hormuz were dashed. With the strait under blockade, international crude oil rallied sharply, driving chemical-sector prices higher. At the same time, downstream phthalic anhydride (PA) inventories had been nearly depleted, triggering a concentrated wave of rigid-demand restocking. As a result, domestic PA prices rebounded from the bottom.
Concentrated buying lifts PA market; prices stop falling and rebound
Specifically, Jiangsu ortho-xylene-based PA prices first fell and then rose during the period, trading within a range of 8,900–9,150 CNY/ton. Hebei naphthalene-based PA prices also declined before rebounding, with prices moving within 7,650–7,950 CNY/ton. Over this cycle, domestic PA prices rebounded after an earlier decline. The Strait of Hormuz remained closed to navigation, and international crude oil led commodity futures prices higher, giving a strong boost to market sentiment. Recent declines in domestic PA prices had left downstream buyers with largely depleted PA feedstock inventories. The crude oil rebound triggered a concentrated release of rigid-demand buying, further supported by improving export transaction volumes. As a result, spot supply of domestic ortho-xylene-based PA became tight, and the oversold period for northern naphthalene-based PA inventories lengthened, helping domestic PA prices stabilize and rebound.
The northern naphthalene-based PA market was the main driver of this rebound. Earlier, trading margins in the northern naphthalene-based PA market were excessively high, and with supply recovery expected, market supply growth expectations helped ease the tight spot supply in some regions. Under negative feedback, northern naphthalene-based PA prices fell rapidly at the beginning of the month, causing the price spread between ortho-xylene-based and naphthalene-based PA to widen again—at one point reaching 1,300 CNY/ton—thereby highlighting once more the low-price advantage of naphthalene-based PA. During that period, downstream demand was weak, and downstream buyers had little interest in building inventories, mostly consuming existing stocks. This left downstream PA feedstock inventories essentially exhausted. Subsequently, boosted by the crude oil rally, rigid-demand buying was released in concentration, and naphthalene-based PA prices rebounded first.
Exports drive consumption growth
In the current period, the PA supply-demand balance showed supply exceeding demand, but the gap narrowed, boosting market sentiment. Although PA supply changed little, demand increased, providing support to prices. Looking at domestic demand data, although the capacity utilization rates of the three major downstream sectors—DOP, DBP, and UPR—all trended downward, rigid demand was released in concentration after downstream feedstock inventories were exhausted, and actual off-take demand rose. On the external demand side, as domestic naphthalene-based PA prices fell sharply, export transactions for naphthalene-based PA expanded notably, and the marked increase in export demand lent strong support to the market.
Table 1 Domestic supply-demand balance (unit: 10,000 tons)
| Data type | Item | Current period | Previous period | Change | Next period trend |
|---|---|---|---|---|---|
| Supply | Ortho-xylene-based PA output | 1.63 | 1.56 | 0.07 | ↗ |
| Naphthalene-based PA output | 2.35 | 2.39 | -0.04 | ↗ | |
| Total PA output | 3.98 | 3.95 | 0.03 | ↗ | |
| Demand | Domestic consumption | 3.5 | 3.6 | -0.1 | ↗ |
| Export volume | 0.3 | 0 | 0.3 | ↓ | |
| Total demand | 3.8 | 3.6 | 0.2 | ↗ | |
| Supply-demand gap | Weekly theoretical balance gap | 0.18 | 0.35 | -0.17 | Absolute value declines |
Data source: Chempricehub Information
During the current period, PA supply increased slightly. Operating rates for ortho-xylene-based PA rose modestly, while those for naphthalene-based PA declined. Overall industry output and capacity utilization inched upward. Since imports account for a negligible share, weekly total supply is assessed based solely on domestic PA output, without factoring in imports. Among downstream consumption figures, DOP consumption declined, DBP consumption declined, and UPR consumption declined, while export volumes grew noticeably. Overall consumption was assessed as increasing. The supply-demand balance showed supply exceeding demand, but the gap narrowed from the previous week. This supply-demand balance aligned with earlier expectations. The supply-demand data provided some support to the market, and downstream buyers remained fairly active in taking delivery amid concentrated rigid-demand restocking.
Looking ahead to the next period, supply is expected to increase, as more units are likely to resume operations than to shut down. On the demand side, downstream operating rates are expected to rise, so theoretical supply will still exceed theoretical demand. However, the absolute value of the supply-demand gap is trending downward, which should provide some support to prices.
The PA supply-demand gap is expected to narrow further next period. However, with expectations of higher capacity utilization in the PA industry and downstream restocking already completed, high-end market follow-through may be constrained, and prices may enter a phase of high-level volatility. Key points to watch: 1. Supply side. Overall operating rates in the PA industry are expected to rise next period, easing supply tightness to some extent and increasing supply pressure. 2. Demand side. Operating rates in the main downstream plasticizer industry are expected to increase, with overall consumption projected to grow. 3. Cost side. Raw material costs for the ortho-xylene-based PA route are expected to remain stable, and cost support from that route stays strong. Industrial naphthalene prices are expected to weaken, leading to a slight decline in costs for the naphthalene-based PA route.
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