China’s phthalic anhydride (PA) market has been mired in a severe downturn since the fourth quarter of 2025, with prices crashing to 5,700 RMB/ton—a four-year low—after the traditional "Golden September and Silver October" peak season failed to materialize entirely. This dramatic price drop is not a short-term market fluctuation, but the result of a structural supply-demand imbalance driven by expanded production capacity, divergent profitability across production processes, and a sharp slowdown in downstream demand. With no clear signs of a fundamental recovery, industry insiders widely expect the PA market to remain mired in low-level volatility for the short term. This analysis breaks down the core factors behind the price slump and the outlook for this critical industrial chemical.
Loose Supply: Capacity Expansion Dashes Peak Season Hopes
The root cause of the PA market’s downturn is overexpanded production capacity, which has completely eroded producers’ pricing power and turned the traditional peak season into a bust. The lackluster performance of "Golden September and Silver October"—a period typically marked by strong demand and price gains—exposed the industry’s deep-seated supply glut, with prices on a continuous downward trajectory since September.
• September 2025: The East China market for ortho-xylene-based PA saw tepid trading, with prices fluctuating narrowly between 6,100–6,250 RMB/ton and no meaningful upward momentum.
• October 2025: Prices plummeted below 5,900 RMB/ton, hitting a new 2025 low and falling by more than 1,000 RMB/ton compared to the same period in 2024.
• November 2025: The downward trend accelerated, with prices sliding to the 5,700 RMB/ton mark—a four-year low—with no signs of a rebound.
This supply surge stems from the commissioning of multiple new PA plants in 2025, pushing both core production routes to capacity growth:
• Ortho-xylene-based PA: Aekyung Petrochemical’s 50,000-ton/year Ningbo plant came online, lifting China’s total capacity to 1.63 million tons/year—a 3% year-on-year increase.
• Naphthalene-based PA: Shanxi Sanqiang and Coking Group’s 50,000-ton/year plants commenced operations successively, driving total capacity to 1.72 million tons/year—a 5.8% year-on-year rise.
As noted by Qian Fang, an analyst at JLC Network Technology Co., Ltd., the expanded supply has left PA manufacturers with no bargaining power, forcing them to offer widespread discounts to maintain cash flow and market share— a practice that has pushed the industry’s price center down continuously. While some factories have expressed a willingness to support prices in the fourth quarter, the weak fundamental backdrop means the market lacks any meaningful rebound momentum.
Profit Divergence: Ortho-Xylene PA Turns Profitable, Naphthalene PA Mired in Losses
Phthalic anhydride is produced via two primary processes—ortho-xylene (o-xylene) based and naphthalene based—and 2025 has seen a dramatic reversal in profitability between the two, driven by divergent raw material price trends. This shift has further reshaped the PA market, with naphthalene-based producers slashing operating rates to stem losses.
Ortho-Xylene-Based PA: From Losses to Marginal Profits
After years of operating at a loss, the ortho-xylene-based PA route has entered a marginal profit state in 2025, thanks to increased supply and falling prices of its core raw material, o-xylene. The commissioning and resumption of operations at the Yulong Island Integrated Refining and Chemical Project’s second-phase aromatics complex and Tianjin Petrochemical’s aromatics plant have boosted domestic o-xylene supply significantly, easing cost pressures for producers. This has reversed the 300–500 RMB/ton loss the route faced previously, marking a rare bright spot for the PA industry.
Naphthalene-Based PA: Severe Cost Inversion, Operating Rates Slump to 40–50%
In stark contrast, the naphthalene-based PA route—once the more profitable of the two—has been mired in severe cost inversion since the second quarter of 2025. After struggling near the breakeven point early in the year, the route’s losses ballooned to over 900 RMB/ton as industrial naphthalene prices rose, squeezing profit margins to unsustainable levels. While a late-year drop in industrial naphthalene prices has slightly improved profitability, the route has failed to break through the breakeven line and remains in a loss-making state.
To mitigate losses, naphthalene-based PA producers have slashed operating rates to a historic low of 40–50%—a level that has become the new norm for the segment. Industry insiders note that the divergent raw material trends driving this profit gap are set to persist, and the reversed profitability of the two production methods is unlikely to change in the short term. The PA industry has thus entered a period of deep structural adjustment, with only the permanent exit of outdated capacity and sustained low operating rates offering any slight room for profit recovery.
Weak Downstream Demand: The "Engine" Stalls Completely
A slumping downstream market—PA’s primary demand driver—has compounded the supply glut, with core downstream sectors purchasing PA only on rigid demand and abandoning large-scale inventory replenishment entirely. Phthalic anhydride’s two major end-use markets—plasticizers (notably DOP) and unsaturated polyester resins (UPR)—are both grappling with their own supply-demand woes, leading to a near-total collapse in PA demand and shattering any hopes of a peak-season recovery.
Plasticizers (DOP): Substitution and Low Demand Crush Vitality
Dioctyl phthalate (DOP), the largest downstream application for PA (a key raw material for flexible PVC production), is facing a double blow of growing substitution pressure and shrinking end-demand. Amid stringent environmental regulations and intensified market competition, the DOP market has lost all vitality, with overall operating rates remaining at low levels and prices falling in lockstep with raw materials to new 2025 lows.
As Wang Chunming, General Manager of Shandong Ruiyang Chemical Trading Co., Ltd., notes, the DOP market is characterized by cautious wait-and-see sentiment, with transactions limited to rigid demand buying only. Adding to the pressure, 2-ethylhexanol—another key DOP raw material—is also in a downward price channel, providing no effective cost support for DOP. Producers and traders are thus forced to offer further discounts to move goods, creating a vicious cycle that offers no relief for PA demand.
Unsaturated Polyester Resins (UPR): Record Lows and Low Operating Rates
Unsaturated polyester resins (UPR)—a critical PA downstream for composites used in construction, transportation, and sanitary ware—are also mired in a strong supply, weak demand environment, with prices hitting multi-year historical lows and operating rates remaining depressed. A new 50,000-ton/year UPR plant commissioned in Huanggang, Hubei, at the end of October 2025 has failed to boost PA demand, as the new capacity only adds to the UPR market’s own supply glut.
Currently, the UPR industry’s operating rate stands at a paltry 36%, with no signs of improvement in the short term. Industry analysts expect the UPR market to face further downward price pressure, meaning operating rates will remain low and raw material procurement—including PA—will stay lackluster. This has removed the single largest potential driver of a PA market recovery.
Market Outlook: Prolonged Low-Level Volatility with No Clear Rebound Catalyst
With the core issues of overcapacity, divergent production profitability, and collapsed downstream demand remaining unresolved, China’s PA market is set to remain in prolonged low-level volatility for the short to medium term. There are no clear catalysts for a fundamental rebound, and the 5,700 RMB/ton price level may become the new normal for the industry in the near term.
While some minor positive factors may emerge—such as factory price support measures or a slight rebound in crude oil prices—these will be insufficient to offset the industry’s structural supply-demand imbalance. The PA market’s recovery will hinge on three key developments:
1. A meaningful reduction in production capacity, including the permanent exit of outdated naphthalene-based PA units;
2. A sustained recovery in downstream demand, particularly in the DOP and UPR sectors, driven by improvements in end-markets like construction and manufacturing;
3. A reversal of the raw material price divergence between o-xylene and industrial naphthalene, to restore balance to the PA production landscape.
For PA producers and traders—including global suppliers like Achilles Chem, a reliable provider of high-purity PA for plasticizers, resins, and coatings—the current market environment demands strict cost control, supply chain optimization, and a focus on high-end, specialized PA applications to mitigate the impact of low commodity prices.
Conclusion: A Structural Downturn Requiring Industry-Wide Adjustment
The four-year low in phthalic anhydride prices is a symptom of a deep structural downturn in China’s PA industry, not a temporary market blip. The confluence of expanded production capacity, reversed profitability across production routes, and a stalled downstream demand engine has created a perfect storm for the market, with no easy path to recovery.
The industry is now entering a period of long-term adjustment, where only the most efficient, cost-competitive producers—both ortho-xylene and naphthalene-based—will survive. The permanent exit of outdated capacity, coupled with a potential recovery in downstream construction and manufacturing markets, will be the only viable paths to rebalancing supply and demand and pushing PA prices back to sustainable levels. Until then, the PA market will remain stuck in a low-price, low-margin rut— a stark reminder of the risks of unplanned capacity expansion in a mature industrial chemical sector.
