Ortho-xylene-based phthalic anhydride prices fell in June

According to the commodity market analysis system of SunSirs, the quoted price for ortho-xylene-based phthalic anhydride stood at 8,200 RMB/ton as of June 29, marking a fluctuating decline of 5.57% from the 8,683.33 RMB/ton recorded on June 1. The drop was driven by two major bearish factors: the conclusion of a US-Iran agreement caused a sharp fall in crude oil prices—which cascaded down to lower the cost of ortho-xylene feedstock—and demand for downstream plasticizers collapsed during the off-season. Consequently, prices for both ortho-xylene-based and naphthalene-based phthalic anhydride fell, resulting in a downward, fluctuating market trend for domestic phthalic anhydride throughout June.

Phthalic anhydride market trended downward in June

Following an agreement between the US and Iran, international oil prices plummeted; this triggered a cost transmission effect—from crude oil to xylene and then to orthoxylene—leading Sinopec to lower its listed price for orthoxylene. Consequently, the production cost for orthoxylene-based phthalic anhydride fell, while naphthalene-based phthalic anhydride prices weakened in tandem. Demand from key downstream sectors—DOP and unsaturated resins—was sluggish due to the off-season, and factories showed little interest in restocking; operating rates hovered at only around 50%, resulting in lackluster market trading. Prices for both orthoxylene-based and naphthalene-based phthalic anhydride declined; orthoxylene-based production remained loss-making while profits for the naphthalene-based process shrank significantly, causing the overall price level to shift downward and hit a periodic low by the end of the month.

Cost support for phthalic anhydride weakened

Following the easing of US-Iran tensions, international crude oil prices fluctuated downward, directly impacting the aromatics supply chain; in June, the price of ortho-xylene fell to 8,200 yuan/tonne, leading to a sharp drop in raw material costs and a reduction in the cost of producing phthalic anhydride. Industrial naphthalene prices weakened in tandem with the broader chemical market, shifting the baseline cost for raw materials downward. While the naphthalene-based production route operates independently of crude oil prices and typically yields high profits, the drop in phthalic anhydride prices in June caused gross margins to shrink significantly, leaving only slim profits; consequently, there is limited downward pressure on the price of naphthalene-based phthalic anhydride.

Low Phthalic Anhydride Supply

On the supply side, producers of phthalic anhydride via the ortho-xylene route show little enthusiasm for production due to heavy losses; some units are operating at low loads for extended periods or have been shut down, resulting in an overall industry operating rate of around 50%. Although the naphthalene-based route still yields meager profits, weak downstream demand is hindering shipments, leading to slight reductions in operating loads and a minor decline in operating rates. Overall factory and port inventories remain low, with no significant accumulation; however, with downstream purchasing contracting, there is a relative surplus of spot market supply.

Weak Demand for Phthalic Anhydride

During the traditional off-season for the downstream plasticizer industry, operating rates have dropped to 50%. Demand from end-use sectors such as real estate and building materials has shown no substantial improvement; downstream manufacturers are purchasing strictly on an as-needed basis with zero inventory stockpiling, completely avoiding advance raw material procurement and strongly resisting the high prices of phthalic anhydride (PA). Consequently, downstream demand provides insufficient support for PA prices, while the continued decline in the price of the downstream product DOP exerts downward pressure on PA procurement costs. Following the resumption of shipping through the Taiwan Strait, international PA prices have fallen, leading to a contraction in China's export orders; this has intensified the pressure of oversupply and weakened the support for any rise in PA prices.

Market Outlook:

Analysts at SunSirs believe that, in the short term, cost-side support for phthalic anhydride has weakened due to sharp declines in the prices of crude oil and ortho-xylene, intensifying downward pressure on prices. On the demand side, the traditional off-season for flexible PVC products persists into July; operating rates for DOP (dioctyl phthalate) remain sluggish, keeping demand for phthalic anhydride under continued pressure. Overall, the market outlook suggests that phthalic anhydride prices will likely experience weak, fluctuating downward movement.

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