Introduction: Tight supply of feedstock ortho-xylene has exacerbated market shortages, driving up prices for ortho-xylene. This has further increased production costs for ortho-xylene-based phthalic anhydride (PA). However, PA market prices have shown a divergence from the trend of rising feedstock costs.

Weak Demand Leads to Downtrend in PA Market

Specifically, during this period, prices for ortho-xylene-based PA in Jiangsu fell, fluctuating within the range of 9,000-9,300 RMB/ton. Naphthalene-based PA prices in Hebei fluctuated between 7,900-8,100 RMB/ton. Domestic PA prices declined this cycle, with demand-side factors becoming the dominant market driver. Persistently weak end-user demand and production cuts in the major downstream plasticizer industry led to a significant drop in PA demand. Meanwhile, under high operating rates in the domestic PA industry, supply pressure for ortho-xylene-based PA increased in some regions, putting downward pressure on the market. However, supported by rising ortho-xylene prices, the downside for ortho-xylene-based PA was limited, though inventory accumulation occurred to varying degrees in the sector. For naphthalene-based PA in the north, some supply was oversold. With poor downstream order intake, market sales faced significant resistance. Producers focused on locking in profits, leading to an expanded decline in naphthalene-based PA prices.

PA Industry Chain Profits Concentrate Upstream

This period saw profits shifting upstream within the industry chain, leading to some divergence. The average weekly comprehensive profit for ortho-xylene was 1,060 RMB/ton, an increase of 510 RMB/ton (up 92.73%) from the previous period. Ortho-xylene-based PA profits were -222 RMB/ton, a decrease of 341 RMB/ton (down 286.55%). Naphthalene-based PA profits were 1,398 RMB/ton, down 158 RMB/ton (a decrease of 10.15%). Upstream ortho-xylene profitability increased, losses widened for ortho-xylene-based PA producers, and profitability declined for naphthalene-based PA producers. Among downstream products, DOP profits decreased, while UPR shifted from loss to profit. The recent rise in PA prices increased cost pressure on downstream sectors, though downstream markets also showed a rebound, resulting in significant variation in profitability levels. Due to their own demand factors, profits in downstream PA industries were generally positive. For DOP, rising octanol prices and falling PA prices led to lower costs. However, with DOP market prices also falling, industry profits declined. UPR industry profits increased.

PA Industry Supply Growth Expected, But Demand May Weaken

This period saw growth in PA supply, primarily from ortho-xylene-based PA, while naphthalene-based PA operating rates remained stable, leading to a slight increase in overall industry output with little change in capacity utilization. The share of imports is almost negligible, so weekly overall supply is assessed based solely on domestic PA production, excluding imports. In downstream consumption, DOP consumption fell, DBP consumption was stable, UPR consumption grew, and exports declined. Overall consumption is assessed as having decreased. The supply-demand balance showed oversupply, with the surplus gap widening compared to last week. The supply-demand balance during the cycle aligned with prior expectations. Supply-demand data exerted some downward pressure on the market. Coupled with declining downstream demand consumption, resistance to accepting new orders at high prices was strong, hindering follow-through on high-priced transactions.

Looking ahead to the next period, market supply is expected to increase as more plants resume operations than anticipated units shut down. Meanwhile, downstream plant operations are expected to decline on the consumption side. Theoretically, supply will exceed demand, and the absolute value of the supply-demand surplus is trending towards increase, which will impose some constraints on prices.

Outlook for the Next Period

The supply-demand gap for PA is expected to widen in the next period. Although cost support for ortho-xylene-based PA remains strong, expectations of rising inventory may lead prices to trend downward. Naphthalene-based PA market prices are also expected to fall.

Key Focus Areas:

1. Supply Side: Overall PA industry operating rates are expected to increase next period, with supply pressure for ortho-xylene-based PA rising in some regions.
2. Demand Side: Downstream operations are expected to weaken slightly, leading to decreased demand from downstream industries. Overall consumption is projected to decrease.
3. Cost Side: Feedstock costs for ortho-xylene-based PA are expected to remain stable, providing strong cost support for the sector. Industrial naphthalene prices are expected to weaken, indicating insufficient cost support for naphthalene-based PA.