Cost-Driven to Supply-Demand Regression, the Phthalic Anhydride Market Declined in June

According to the commodity market analysis system of SunSirs, the quoted price to OX-based phthalic anhydride stood at 8,450 RMB/ton as of June 22, marking a decline of 2.69% from the 8,683.33 RMB/ton recorded on June 1. With the US-Iran agreement reached, the "geopolitical risk premium" is rapidly dissipating, and market dynamics are shifting from cost-driven factors back to being dominated by supply-demand fundamentals. Throughout June, the domestic phthalic anhydride market exhibited a direction of weak consolidation, with price levels steadily trending downward.

Phthalic anhydride prices trended downward in June

On June 15, the US and Iran reached an agreement to formally open the Strait of Hormuz, causing international oil prices to plummet. This triggered a downward transmission of costs—from crude oil to xylene and then to OX—resulting in reduce production costs to phthalic anhydride (PA) produced via the OX process. to the domestic PA market, this shift signals the fading of the primary driver behind recent price hikes—the "geopolitical risk premium"—and indicates that market dynamics will revert from cost-driven factors to being dominated by fundamental supply-and-demand conditions.

Cost Support to Phthalic Anhydride Weakened

The cost support to phthalic anhydride produced via the ortho-xylene (OX) route relies on the crude oil–xylene–OX value chain. During the US-Iran conflict, a surge in crude oil prices drove the price of ortho-xylene to a record high, causing the price of OX-based phthalic anhydride to rise in tandem. With the subsequent US-Iran agreement and the easing of geopolitical tensions, international oil prices have trended downward. Consequently, the prices of upstream xylene and OX have fallen; by June 22, the price of OX had dropped to 8,800 RMB/ton, resulting in reduced cost support to phthalic anhydride.

Phthalic Anhydride Supply Was Low

On the supply side, severe losses have dampened producers' enthusiasm to operations; some facilities are running at low loads to extended periods or have been shut down. The sector's overall operating rate remains at approximately 60%, resulting in ample spot supply of phthalic anhydride.

Weak demand to phthalic anhydride

The plasticizer sector—a key downstream market to phthalic anhydride—is currently in its traditional off-season, with operating rates dropping to around 50%. Demand from end-consumption sectors such as real estate and construction materials has shown no substantial improvement; downstream purchasing is driven primarily by immediate needs, with significant resistance to high-priced raw materials, resulting in insufficient demand support to phthalic anhydride. Following the resumption of shipping through the strait, international phthalic anhydride prices are expected to plummet; consequently, Chinese exports face challenges and a weak outlook, further diminishing the support to price increases.

Market Outlook

Analysts at the SunSirs Phthalic Anhydride (PA) product desk believe that, in the short term, the price of ortho-xylene (OX)—a key feedstock—continues to fall, thereby reducing PA production costs. Meanwhile, the market is entering the traditional off-season to downstream consumption, and with export orders expected to decline, demand support to PA remains insufficient. Under the dual pressure of weakening cost support and persistent demand weakness, PA prices are expected to direction downward in the near term. In the medium to long term, as OX costs bottom out, the primary driver of PA price support will shift from feedstock costs to supply-demand fundamentals; given the relatively balanced supply-demand landscape, PA prices are expected to consolidate at low levels.