Since the beginning of August, domestic phthalic anhydride (PA) prices have dropped rapidly, with demand-side factors resuming their dominant role in the market. Pressured by declining capacity utilization in the key downstream plasticizer sector and export headwinds, the domestic PA market has been trending lower under downward pressure.
Weak demand pulls down PA market prices
Specifically, during this period, ortho-xylene-based PA prices in Jiangsu declined, trading in the range of 9,100–9,300 yuan/ton, while naphthalene-based PA prices in Hebei fell to trade at 7,800–8,200 yuan/ton. Over this cycle, domestic PA prices declined as demand-side factors once again took the lead in the market. Under negative feedback from end-use demand, domestic PA prices came under downward pressure. Amid US–Iran negotiations, international crude oil prices plunged, and commodity futures prices declined, heightening the market's wait-and-see sentiment. In addition, capacity utilization in the key downstream plasticizer segment continued to slide, reducing PA consumption. Combined with expectations of higher capacity utilization in the PA industry, overall market sentiment turned bearish, and prices drifted lower in a gradual decline. Trading volumes continued to shrink during the week, and the previously tight spot supply of naphthalene-based PA in northern China was alleviated to a certain extent.
Negative demand feedback reduces PA consumption
During the week, capacity utilization across key downstream sectors declined versus the prior period: DOP operating rates fell, DBP rates posted modest gains, and UPR rates declined. Capacity utilization in the DOP sector, the primary downstream, fell 4 percentage points week on week to 54%. The DBP sector's capacity utilization rose 1 percentage point week on week to 49%. China's unsaturated polyester resin operating rate stood at 33% for the week, with overall utilization edging down from the previous period. Production at UPR plants was generally stable but with a weakening bias. One unit in Tianjin was shut down temporarily, a unit in Liaoyang was also halted, two units in Shandong ran at reduced loads, and one unit in Guangzhou cut its operating rate, resulting in a slight drop in output and an overall softening of the supply structure. In the next period, taking into account recent maintenance and restart activity, capacity utilization is expected to decline for both UPR and DOP, while DBP utilization is expected to remain stable. On the supply front, facilities resuming production are expected to outnumber scheduled shutdowns, pointing to higher supply; on the consumption front, downstream units are expected to reduce output. Projected supply will exceed projected demand, and the absolute supply–demand gap is trending wider, which will place downward pressure on prices.
Profits in the PA value chain remain concentrated upstream
During this period, profits migrated upstream along the value chain, with notable divergence across segments. Upstream ortho-xylene profitability strengthened, while margins for both ortho-xylene-based and naphthalene-based PA declined. This period, ortho-xylene's average weekly integrated profit was 1,430 yuan/ton, up 120 yuan/ton from the prior period. Ortho-xylene-based PA profit was 698 yuan/ton, down 90 yuan/ton or 11.42%. Naphthalene-based PA profit was 911 yuan/ton, down 306 yuan/ton or 25.14%. Among downstream products, DOP losses widened, while UPR swung from a loss to a profit. Although PA prices have fallen recently, downstream cost pressure remains substantial, downstream markets have also moved lower, and profitability across downstream sectors varies considerably.
In the coming period, the supply–demand gap for PA is expected to widen, and the price spread between ortho-xylene-based and naphthalene-based PA is projected to expand. Together with expectations of higher capacity utilization in the PA industry, domestic PA prices are expected to continue their decline. Key factors to watch: 1. Supply. Overall operating rates in the PA industry are expected to rise in the next period, easing supply tightness to some degree and increasing supply-side pressure. 2. Demand. Operating rates in the key downstream plasticizer sector are expected to decline, and overall consumption is projected to contract. 3. Costs. Costs for ortho-xylene-based PA are expected to remain stable, with cost support from the ortho-xylene route staying firm. Average weekly prices of industrial naphthalene are expected to decline, and costs for naphthalene-based PA are expected to weaken modestly.
Comments
0