Orthoxylene and Phthalic Anhydride: 2025 Market Review and 2026 Outlook

Market Overview: A Year of Weak Demand and Shifting Dynamics

Throughout 2025, the orthoxylene and phthalic anhydride markets were shaped by three persistent forces: structurally weak downstream demand, volatile energy and aromatics costs, and steady shifts in trade and policy frameworks. Although occasional pulses of activity emerged, demand for plasticizers, unsaturated polyester resins, and related applications rarely moved beyond a “okay but not great” trajectory in both the Americas and Europe. The second half of the year was especially underwhelming, with sentiment notably more pessimistic in Europe.

In Asia, orthoxylene and phthalic anhydride prices dipped midyear sharply, then saw a modest rebound before declining further toward the end of the year—reinforcing the region’s persistent oversupply. Tariff actions and revisions in the United States, muted macro indicators in Europe, and uneven industrial momentum across Asia added further pressure. Together, these themes produced a year in which orthoxylene and phthalic anhydride behaved largely as price-takers, following mixed xylenes and crude rather than market fundamentals.

Price and Margin Trajectory: Cost-Led Markets, Not Demand-Led

Pricing in 2025 was driven primarily by feedstock and energy dynamics rather than changes in demand.

North America

Orthoxylene contracts moved within a narrow range, rising modestly when mixed xylenes strengthened and correcting when costs eased. Firm gasoline and aromatics markets late in the year kept prices from weakening as much as underlying demand might have implied.

West Europe

Contracts edged higher around midyear in response to firmer mixed xylenes and gasoline cracks, then eased in the autumn as mixed xylenes corrected. Spot discounts widened in segments with particularly weak demand.

Asia

Price volatility was most pronounced in Asia. Orthoxylene values were cut repeatedly over the summer as crude and mixed xylenes softened and local demand weakened, sending prices to their lowest levels of 2025 before a modest rebound. This pattern reappeared in the final months of the year. Margins tightened whenever upstream gasoline and mixed xylenes outpaced downstream resin demand and recovered only when upstream costs fell faster than contract adjustments.

Phthalic anhydride followed a similar trajectory. In North America and Europe, contracts typically moved in tandem with orthoxylene, while limited spot liquidity offered few independent signals. In Asia, both orthoxylene-based and naphthalene-based routes experienced extended periods of negative margins. Producers accepted small losses to maintain continuity and protect downstream relationships, especially in China.

By late 2025, the global landscape was clear: orthoxylene and phthalic anhydride were overwhelmingly cost-led markets, with mixed xylenes and gasoline cracks exerting the greatest influence on price formation.

Cost and Macro Environment: Crude, Gasoline, and a Soft Global Economy

The broader cost environment in 2025 was defined by volatile—but slightly softer—crude oil, periods of tight reformate and gasoline supply in the Atlantic Basin, and mixed xylenes and toluene that behaved more like gasoline blendstocks than chemical feedstocks. A tight gasoline supply, low inventories, and specification changes kept aromatics premiums firm, even as crude softened, especially during the second half of the year.

Macro indicators offered little relief. In the United States, manufacturing data hovered around the expansion line; tariffs, housing softness, and cautious consumers limited confidence, even as light-vehicle sales occasionally surprised to the upside. In the European Union, construction and manufacturing showed only tentative stabilization from a low base. In Asia, China's manufacturing sector oscillated between marginal contraction and modest growth, while India remained the regional bright spot.

For orthoxylene and phthalic anhydride, this meant upstream gasoline and mixed xylenes strength frequently surpassed the levels downstream markets could comfortably support—tightening margins and reinforcing cautious operating strategies.

Regional Market Recap: North America, Western Europe, and Asia

North America

Orthoxylene and phthalic anhydride markets in North America remained balanced to slightly long. Orthoxylene production ran steadily, with few disruptions, and the region was largely self-sufficient, with imports falling sharply due to reduced demand and an adequate domestic supply.

Phthalic anhydride absorbed the Koppers closure more smoothly than expected. Other producers and distributors filled the gap, and by mid-year, the market had rebalanced, although some hidden demand persisted, as Koppers continued to serve contracts from its inventory. End-use demand for plasticizers, coatings, and unsaturated polyester resins improved only seasonally. Housing and infrastructure spending offered some support, but high interest rates, tariff uncertainty, and a soft discretionary backdrop kept buyers conservative. Overall consumption is expected to finish below 2024 levels.

Logistics were stable, aided by a quiet hurricane season for the U.S. Gulf Coast and smooth barge and rail operations. Producers aligned operating rates closely with real demand and focused on margin protection.

Western Europe

Western Europe remained structurally long throughout 2025. Producers curtailed operating rates and, in some cases, kept plants or individual lines idle. Several phthalic anhydride units closed permanently or entered prolonged curtailment, yet capacity still exceeded structurally weak demand.

Orthoxylene contracts rose midyear with mixed xylenes strength, then fell later as costs corrected. Spot activity was minimal and heavily discounted. Downstream segments—plasticizers, UPR, and coatings—struggled, and substitution toward non-phthalate solutions, combined with imports of unsaturated polyester resins, limited demand for phthalic anhydride.

Europe continued as a structural importer of orthoxylene and flake phthalic anhydride. Imports from Asia and Turkey, supported by favorable freight and currency dynamics, exerted pressure on domestic pricing power, even when absolute volumes were modest. Trader inventories and low-priced flake offers often played a more significant role in price formation than underlying supply and demand fundamentals.

Asia

Asia showed the clearest signs of oversupply and margin compression. New and restarted orthoxylene capacities in China and Northeast Asia returned to a market defined by sluggish downstream demand. Orthoxylene and phthalic anhydride prices in China hit new lows during the summer, stabilized in the autumn, and then declined heading into year-end.

Producers on both the orthoxylene and naphthalene routes operated at reduced rates, with mid-60 percent utilization becoming common. Some producers operated at a loss briefly to preserve customer relationships. Southeast Asian demand offered intermittent relief, and exports to India and other destinations were limited to requirement-based volumes. Mixed xylenes and toluene rebounded modestly from late-year lows on stronger blending demand from India and Southeast Asia, but upside remained limited by uneven demand and persistent benzene weakness.

Structural Shifts: Closures, Curtailments, and Evolving Demand

Three structural themes defined 2025 and set up important dynamics for 2026:

North American Realignment After the Koppers Closure

Koppers' exit removed a major domestic phthalic anhydride producer and a significant orthoxylene consumer. Other producers and traders filled the gap during 2025, preventing outright shortages. Some Koppers customers continued to receive supplies from inventories, effectively masking part of the true underlying demand that will reemerge as those volumes shift to alternative suppliers in 2026.

European Rationalization Amid Persistent Length

Europe experienced a mix of permanent closures, extended curtailments, and staggered turnarounds. Even with these reductions, the market remained long. Producers ran at minimum sustainable levels and still faced stiff import competition—particularly for phthalic anhydride flake, non-phthalate plasticizers, and UPR.

Capacity Creep and Substitution Trends

In Asia, incremental capacity additions further lengthened an oversupplied system, pressuring producers to export or cut rates. Across multiple regions, downstream customers continued to shift toward alternatives such as DOTP, particularly in Europe and parts of South America, thereby weakening structural demand for phthalic anhydride.

Trade Themes: Tariffs, Imports, and Regional Integration

Tariffs and freight economics shaped 2025 trade flows more than traditional arbitrage.

In the United States, import tariffs were implemented in stages, with pauses and extensions before final confirmation. While less disruptive than early headlines implied, the rollout shifted expectations. Some suppliers initially absorbed tariff costs amid lower freight rates. Over time, the structure favored tariff-free material from Mexico under USMCA, while making certain Asian origins less competitive.

U.S.–Mexico integration deepened, reinforcing a tightly linked regional chain: orthoxylene exports from the U.S. flowed to Mexico, while phthalic anhydride moved from Mexico into the U.S. European markets continued facing import pressure from Asia and Turkey, especially for phthalic anhydride flake and UPR.

In South America, anti-dumping measures targeting certain Asian origins, particularly in Brazil, reshaped flows. Competitive offers from alternative Asian suppliers filled gaps, keeping pressure on local producers and highlighting the region’s sensitivity to global pricing.

2026 Outlook: Assumptions and Early Indicators

Forward-looking commentary remains limited, but several expectations are shared across the market.

Demand recovery is projected to be slow. Most participants do not anticipate a strong rebound in construction, the automotive sector, or discretionary consumer spending until late 2026. North America is expected to experience a structural increase in orthoxylene and phthalic anhydride demand as ex-Koppers volumes are transitioned to new suppliers. The allocation of these tonnes—between U.S. and Mexican producers and between molten versus flake—will influence utilization and trade patterns.

Europe faces continued pressure to rationalize if demand does not improve. Additional curtailments or reconfigurations remain possible. Asia is likely to remain long, with margin improvement depending on disciplined operating rates, incremental regional demand, and selective downstream export activity.

Key Watchpoints for 2026

The following questions will determine whether orthoxylene and phthalic anhydride remain cost-led markets or regain some pricing autonomy:

• Will mixed xylenes and gasoline remain structurally firm, or will refinery runs and trade normalize enough to ease aromatics tightness in the Atlantic Basin?

• How will the post-Koppers landscape reshape North American utilization, especially for flake phthalic anhydride?

• Can European producers withstand sustained import pressure and substitution trends, or will further rationalization be required?

• In Asia, will incremental capacity and weak demand force deeper rate cuts or structural exits among high-cost producers?

The answers to these questions will shape not only price levels but also the degree to which orthoxylene and phthalic anhydride remain captive to upstream dynamics or achieve a more balanced footing in 2026 and beyond.