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Phthalic Anhydride: Divergent Profitability in Two Processes
2023/5/26
In March, the domestic phthalic anhydride market experienced a high and then a subsequent decline. Towards the end of the month, the market began to stabilize, and there was a divergence in profitability between the two production processes. Naphthalene-based phthalic anhydride, which has lower costs, experienced an early recovery, while ortho-based phthalic anhydride turned from profit to loss. Looking ahead, there are still differences in the price trends of the two raw materials, and the cost pressure on ortho-based phthalic anhydride is expected to continue to increase. As of April 14th, the reference price for phthalic anhydride was 8,562.5 yuan per ton, a decrease of 0.72% compared to April 1st. In North China, the mainstream quotation for ortho-based phthalic anhydride ranged from 8,400 to 8,500 yuan, while the market price for naphthalene-based phthalic anhydride was between 8,100 and 8,200 yuan.
The prices of the two raw materials showed opposite trends. "Ortho-xylene, as the raw material for ortho-based phthalic anhydride, started to rebound in March. The main driving factor was the rise in the US dollar market. The window for domestic ortho-xylene exports remained open, and combined with the expectation of ortho-xylene unit maintenance, the market atmosphere was bullish. With the support of leading petrochemical companies raising prices, the domestic ortho-xylene market continued to rise. Although the upward momentum has slowed down, the monthly increase is still above 7%, much higher than the less than 3% increase in ortho-based phthalic anhydride," explained Jia Mingjin, an analyst at Longzhong Information.
On the other hand, the trend of industrial naphthalene, the raw material for naphthalene-based phthalic anhydride, was different. The industrial naphthalene market remained stable and then declined due to weak demand. In addition, phthalic anhydride manufacturers had high inventories of industrial naphthalene, leading to a passive attitude towards its procurement. The continuously decreasing tender prices in the main production regions further intensified the bearish sentiment in the market, resulting in a significant decline in regional prices. The price of industrial naphthalene dropped from over 6,000 yuan in early March to around 5,500 yuan currently.
Market analysts, including Jia Mingjin, believe that the divergent price trends of the raw materials have resulted in differentiated profitability for the two phthalic anhydride production processes. The profit margin for ortho-based phthalic anhydride has been continuously shrinking, leading to losses and an expanding trend of industry losses, putting pressure on the domestic ortho-based phthalic anhydride industry. On the other hand, naphthalene-based phthalic anhydride has seen an expanded profit margin due to the sharp decline in the price of industrial naphthalene. Statistical data shows that in March, ortho-based phthalic anhydride incurred a loss of over 40 yuan per ton, while naphthalene-based phthalic anhydride had a gross profit of nearly 300 yuan per ton.
Looking ahead, in the short term, the production volume and capacity utilization rate of ortho-xylene are still declining, leading to overall supply tightening. The price of ortho-based phthalic anhydride may continue to rise, squeezing its profit margin. For the industrial naphthalene market
, prices have reached a psychological level for traders, and the downward trend is expected to ease. However, the restart of previously shut down units could generate bearish sentiment in the industrial naphthalene market, while the profit margin for naphthalene-based phthalic anhydride still has room to increase.
In March, the domestic phthalic anhydride market initially rose and then declined, stabilizing towards the end of the month and experiencing a slight increase in April. According to analyst Teng Yu from Jinlianchuang, the continuous upward push in raw material prices, the high price difference between domestic and international markets, increased exports of phthalic anhydride, and the impact of unit maintenance in the phthalic anhydride industry led to a tightening market supply, resulting in a rebound in domestic phthalic anhydride prices. However, the positive trend did not last long. As the phthalic anhydride market reached a high level and downstream demand remained weak, combined with the impact of the European and American banking crisis, market panic spread. The commodity futures market experienced a decline, and the domestic phthalic anhydride market also cooled down rapidly, stabilizing slightly towards the end of the month. In March, the average price of ortho-based phthalic anhydride was 8,432 yuan, and the average price of naphthalene-based phthalic anhydride was 8,166 yuan.
Teng Yu and other industry insiders pointed out that due to the price difference between ortho-based and naphthalene-based phthalic anhydride, the market for ortho-based phthalic anhydride did not recover as strongly as naphthalene-based phthalic anhydride, remaining relatively stable. However, after entering April, the market for naphthalene-based phthalic anhydride increased slightly by 50 to 100 yuan.
Looking ahead, in the ortho-based phthalic anhydride sector, Xinyang Technology's 50,000-ton/year unit will be shut down for catalyst replacement, and Zhenjiang Liancheng and Taizhou Liancheng will shut down their 60,000-ton/year units for maintenance. This will likely lead to a significant decline in the operating rate of the ortho-based phthalic anhydride industry. In the naphthalene-based phthalic anhydride sector, Shanxi Nuobo's 40,000-ton/year unit, Shandong Zhongtai's 50,000-ton/year unit, Xinnuo Lixing's 40,000-ton/year unit, and Tangshan Huayi's 40,000-ton/year unit plan to shut down for catalyst replacement, which will also result in a certain decline in the operating rate of the naphthalene-based phthalic anhydride industry.
From the supply perspective, there are expectations of tightening supply for both production processes, which has increased the bullish momentum in the phthalic anhydride market. If prices rise, naphthalene-based phthalic anhydride will benefit more. Additionally, naphthalene-based phthalic anhydride, relying on its price advantage, will suppress the price increase of ortho-based phthalic anhydride.
The slow recovery of demand is undoubtedly the biggest negative factor for the phthalic anhydride market, and it is foreseeable that without a noticeable improvement in demand, the market's recovery will not be sustainable. He Junsong, a salesperson at Jilin Petrochemical, stated that the main downstream sectors for phthalic an
hydride are plasticizers and unsaturated resins, with plasticizers primarily used in the production of polyvinyl chloride (PVC), which is one of the main raw materials for construction pipes. The real estate industry, which is the largest end-user of PVC, has been declining since the second half of 2021, resulting in reduced demand for upstream chemical products and dragging down the plasticizer market.
Specifically, in March, the plasticizer dioctyl phthalate (DOP) increased in price as a result of the rise in raw material costs, but the purchasing intention of end-users weakened, leading to decreased transactions.
Looking ahead, there is a small expected reduction in the overall supply of DOP in April. Industry insiders expect the operating rate of the DOP industry to be around 50-60% in April. The market is in a state of fluctuation and consolidation due to the interplay between cost and demand, with limited support for the phthalic anhydride market.
As for the other downstream sector of phthalic anhydride, the unsaturated resin market is still a buyer's market, with negative news dominating the market. There is a higher possibility of a weak and consolidating short-term market. There is no apparent improvement in demand, and the main trend is still the replenishment of essential demand at low prices. Unsaturated resin manufacturers produce only when they have orders and halt production when there are no orders, which limits the volume of phthalic anhydride purchases.
The prices of the two raw materials showed opposite trends. "Ortho-xylene, as the raw material for ortho-based phthalic anhydride, started to rebound in March. The main driving factor was the rise in the US dollar market. The window for domestic ortho-xylene exports remained open, and combined with the expectation of ortho-xylene unit maintenance, the market atmosphere was bullish. With the support of leading petrochemical companies raising prices, the domestic ortho-xylene market continued to rise. Although the upward momentum has slowed down, the monthly increase is still above 7%, much higher than the less than 3% increase in ortho-based phthalic anhydride," explained Jia Mingjin, an analyst at Longzhong Information.
On the other hand, the trend of industrial naphthalene, the raw material for naphthalene-based phthalic anhydride, was different. The industrial naphthalene market remained stable and then declined due to weak demand. In addition, phthalic anhydride manufacturers had high inventories of industrial naphthalene, leading to a passive attitude towards its procurement. The continuously decreasing tender prices in the main production regions further intensified the bearish sentiment in the market, resulting in a significant decline in regional prices. The price of industrial naphthalene dropped from over 6,000 yuan in early March to around 5,500 yuan currently.
Market analysts, including Jia Mingjin, believe that the divergent price trends of the raw materials have resulted in differentiated profitability for the two phthalic anhydride production processes. The profit margin for ortho-based phthalic anhydride has been continuously shrinking, leading to losses and an expanding trend of industry losses, putting pressure on the domestic ortho-based phthalic anhydride industry. On the other hand, naphthalene-based phthalic anhydride has seen an expanded profit margin due to the sharp decline in the price of industrial naphthalene. Statistical data shows that in March, ortho-based phthalic anhydride incurred a loss of over 40 yuan per ton, while naphthalene-based phthalic anhydride had a gross profit of nearly 300 yuan per ton.
Looking ahead, in the short term, the production volume and capacity utilization rate of ortho-xylene are still declining, leading to overall supply tightening. The price of ortho-based phthalic anhydride may continue to rise, squeezing its profit margin. For the industrial naphthalene market
, prices have reached a psychological level for traders, and the downward trend is expected to ease. However, the restart of previously shut down units could generate bearish sentiment in the industrial naphthalene market, while the profit margin for naphthalene-based phthalic anhydride still has room to increase.
In March, the domestic phthalic anhydride market initially rose and then declined, stabilizing towards the end of the month and experiencing a slight increase in April. According to analyst Teng Yu from Jinlianchuang, the continuous upward push in raw material prices, the high price difference between domestic and international markets, increased exports of phthalic anhydride, and the impact of unit maintenance in the phthalic anhydride industry led to a tightening market supply, resulting in a rebound in domestic phthalic anhydride prices. However, the positive trend did not last long. As the phthalic anhydride market reached a high level and downstream demand remained weak, combined with the impact of the European and American banking crisis, market panic spread. The commodity futures market experienced a decline, and the domestic phthalic anhydride market also cooled down rapidly, stabilizing slightly towards the end of the month. In March, the average price of ortho-based phthalic anhydride was 8,432 yuan, and the average price of naphthalene-based phthalic anhydride was 8,166 yuan.
Teng Yu and other industry insiders pointed out that due to the price difference between ortho-based and naphthalene-based phthalic anhydride, the market for ortho-based phthalic anhydride did not recover as strongly as naphthalene-based phthalic anhydride, remaining relatively stable. However, after entering April, the market for naphthalene-based phthalic anhydride increased slightly by 50 to 100 yuan.
Looking ahead, in the ortho-based phthalic anhydride sector, Xinyang Technology's 50,000-ton/year unit will be shut down for catalyst replacement, and Zhenjiang Liancheng and Taizhou Liancheng will shut down their 60,000-ton/year units for maintenance. This will likely lead to a significant decline in the operating rate of the ortho-based phthalic anhydride industry. In the naphthalene-based phthalic anhydride sector, Shanxi Nuobo's 40,000-ton/year unit, Shandong Zhongtai's 50,000-ton/year unit, Xinnuo Lixing's 40,000-ton/year unit, and Tangshan Huayi's 40,000-ton/year unit plan to shut down for catalyst replacement, which will also result in a certain decline in the operating rate of the naphthalene-based phthalic anhydride industry.
From the supply perspective, there are expectations of tightening supply for both production processes, which has increased the bullish momentum in the phthalic anhydride market. If prices rise, naphthalene-based phthalic anhydride will benefit more. Additionally, naphthalene-based phthalic anhydride, relying on its price advantage, will suppress the price increase of ortho-based phthalic anhydride.
The slow recovery of demand is undoubtedly the biggest negative factor for the phthalic anhydride market, and it is foreseeable that without a noticeable improvement in demand, the market's recovery will not be sustainable. He Junsong, a salesperson at Jilin Petrochemical, stated that the main downstream sectors for phthalic an
hydride are plasticizers and unsaturated resins, with plasticizers primarily used in the production of polyvinyl chloride (PVC), which is one of the main raw materials for construction pipes. The real estate industry, which is the largest end-user of PVC, has been declining since the second half of 2021, resulting in reduced demand for upstream chemical products and dragging down the plasticizer market.
Specifically, in March, the plasticizer dioctyl phthalate (DOP) increased in price as a result of the rise in raw material costs, but the purchasing intention of end-users weakened, leading to decreased transactions.
Looking ahead, there is a small expected reduction in the overall supply of DOP in April. Industry insiders expect the operating rate of the DOP industry to be around 50-60% in April. The market is in a state of fluctuation and consolidation due to the interplay between cost and demand, with limited support for the phthalic anhydride market.
As for the other downstream sector of phthalic anhydride, the unsaturated resin market is still a buyer's market, with negative news dominating the market. There is a higher possibility of a weak and consolidating short-term market. There is no apparent improvement in demand, and the main trend is still the replenishment of essential demand at low prices. Unsaturated resin manufacturers produce only when they have orders and halt production when there are no orders, which limits the volume of phthalic anhydride purchases.
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