Phthalic anhydride margins surged to a five-year high of $131/mt CFR China last Friday after an end-year surge in demand for PA to make dioctyl phthalate.
The last time PA margins were higher was June 21, 2012, at $154/mt CFR China, S&P Global Platts data showed.
PA is made from orthoxylene and its breakeven is calculated as 0.95 of the prevailing price of OX plus $100/mt production costs, putting the minimum spread to OX for PA producers to break even at $105.30/mt.
Margins have been mostly in negative territory since the last quarter of 2012 and flipped to positive only last October, Platts data showed.
Market participants attributed the flip to positive to strong demand for PA in late 2016 to make downstream DOP amid expectations of a rise in DOP prices at the end of the year. Low PA inventories were also cited as a factor.
Also, naphthalene-based PA plants in China cut operating rates in the second half of last year amid a clampdown on adherence to environmental regulations ahead of the G20 summit in Hangzhou, exacerbating already tight supply.
Naphthalene is an alternative feedstock used to make PA that is typically preferred as it is cheaper than OX.
OX prices surged last October amid the strong demand for PA and continued to rise throughout the fourth quarter amid stockpiling ahead of the Lunar New Year holidays.
OX was assessed at $820/mt CFR China last Friday, up from $705/mt at end September.
Margins for PA are expected to remain positive in the first quarter of 2017 as demand remains strong and no new plants are due to come online in coming months. However, demand for DOP has softened to date in January from the December peak.
Margins may also be tempered by steady production at Singapore's Jurong Aromatics Complex, which has a PA production capacity of 200,000 mt/year, in the first half of 2017.
The complex was shut in December 2014 and resumed operations in July last year.
