Introduction: After the May Day holiday, international crude oil prices fell sharply, and commodity futures prices declined, intensifying market wait-and-see sentiment. Affected by this, the upward momentum of the domestic naphthalene-based phthalic anhydride market encountered resistance. However, due to a tight spot supply situation, the domestic naphthalene-based phthalic anhydride market resumed its rebound trend.

Price Trends for Ortho-xylene and Naphthalene-based Phthalic Anhydride Diverged

Specifically, during this period, the price of ortho-xylene-based phthalic anhydride in the Jiangsu market declined, with a price range of 8,800–8,950 RMB/ton, while the naphthalene-based phthalic anhydride market in Hebei fluctuated between 7,500–7,600 RMB/ton. After the May Day holiday, domestic phthalic anhydride prices showed diverging trends, with supply-side factors becoming the main market driver. As plant maintenance commenced one after another, the domestic phthalic anhydride industry's capacity utilization rate declined noticeably, easing market supply pressure and providing some support. Due to the wide price spread between ortho-xylene and naphthalene-based products, ortho-xylene-based phthalic anhydride faced greater sales resistance, leading to a weak decline. Meanwhile, naphthalene-based phthalic anhydride inventories were generally oversold through mid-to-late month. With tight spot supply and expectations of plant maintenance, the naphthalene-based market rebounded, but its upward momentum was hindered by the sharp drop in crude oil. However, entering the latter half of the week, concentrated restocking by downstream users for essential needs, coupled with improved export transactions, led to further overselling of naphthalene-based inventories. The spot supply shortage intensified in some regions, prompting the domestic naphthalene-based phthalic anhydride market to initiate a rebound.

Since the beginning of this year, geopolitical conflicts have driven international crude oil prices sharply higher, boosting prices of upstream aromatics chain products. Additionally, ortho-xylene experienced a concentrated maintenance wave this year, leading to supply shortages and sustained price increases, which significantly raised the cost of ortho-xylene-based phthalic anhydride. On the other hand, the oversupply of industrial naphthalene, another raw material, worsened. Under supply-demand dynamics, the domestic naphthalene-based phthalic anhydride industry enjoyed robust profitability, primarily focusing on overselling to lock in profits, which also caused the price spread between ortho-xylene and naphthalene-based products to widen continuously. Normally, the spread between the two is 200–300 RMB/ton. However, this year the spread has been expanding, and by the end of April, it widened again, reaching 1,400 RMB/ton on a weekly basis. Due to this huge price difference, some downstream users of ortho-xylene-based phthalic anhydride switched back to naphthalene-based products, further exacerbating the tight supply of naphthalene-based phthalic anhydride.

The Likelihood of the Price Spread Between Ortho-xylene and Naphthalene-based Phthalic Anhydride Narrowing is Increasing

Under the influence of geopolitical conflicts and concentrated maintenance of ortho-xylene, the naphthalene-based phthalic anhydride sector has become the biggest winner in this round. High profitability in the naphthalene-based sector is expected to persist, and the industry generally has a long pre-sale cycle. Some naphthalene-based phthalic anhydride enterprises have oversold orders through late May or even the end of the month, with even those with fewer pre-sale orders scheduling delivery around the 15th, making it difficult to alleviate the spot supply shortage in the domestic naphthalene-based phthalic anhydride industry. Especially with naphthalene-based products partially replacing ortho-xylene-based demand, this equates to additional demand for naphthalene-based material. Although operating rates are high in the naphthalene-based sector, due to plant equipment maintenance and some previously idled units not yet restarting, capacity utilization is capped at around 70%, resulting in relatively limited supply-side increments. Given the intense shortage of naphthalene-based phthalic anhydride, market prices may still have room to rise. In contrast, ortho-xylene-based phthalic anhydride may continue to consolidate in a range. Consequently, the price spread between the two may narrow appropriately, but both will still maintain a relatively high differential.

Ortho-xylene Enters Maintenance Season, Providing Strong Cost Support for Ortho-xylene-based Phthalic Anhydride

As ortho-xylene plants enter a concentrated maintenance period, the domestic ortho-xylene industry's capacity utilization rate is expected to decline sharply. Yangzi Petrochemical's units are being shut down sequentially, and Hainan Refinery and Fujian Haichuang also have maintenance plans. Consequently, it is estimated that by June, the domestic ortho-xylene capacity utilization rate may drop to around 55%, hitting a new low in recent years, exacerbating the supply shortage of ortho-xylene. Under the concentrated maintenance of ortho-xylene, the expected reduction in ortho-xylene supply is significant. Affected by this, the domestic ortho-xylene-based phthalic anhydride industry's capacity utilization rate will also decline again, thus reducing supply pressure from ortho-xylene-based phthalic anhydride. With the shortage of upstream ortho-xylene, the cost-side support for ortho-xylene-based phthalic anhydride is strong, providing some support to the market.

Overall, the divergence in domestic phthalic anhydride price trends is likely to continue, with the market showing a pattern of naphthalene-based strength and ortho-xylene-based weakness. With low raw material inventories in downstream industries and the overselling of naphthalene-based phthalic anhydride, the spot supply shortage in the domestic naphthalene-based market will persist. There may be room for further upward movement in naphthalene-based phthalic anhydride prices. The market may primarily focus on narrowing the price spread between ortho-xylene and naphthalene-based products, but the two will still maintain a certain high spread. In the ortho-xylene-based phthalic anhydride market, with strong cost support from ortho-xylene, the sector is experiencing overall losses. Coupled with further declines in capacity utilization, market supply pressure has eased to some extent. Overall market prices are likely to stabilize.