The Chinese Naphthalene market presented a dynamic case of stability amidst a backdrop of fluctuating demand and supply forces. Despite a decline in key downstream sectors including production of Phthalic Anhydride and synthetic resin including Epoxy Resin, Naphthalene prices have remained relatively unchanged in early July 2024. While downstream demand in some sectors shows weakness, the stability in feedstock coal tar prices and balanced supply from coking coal production keep production costs in check. Additionally, the lack of significant fluctuations in the downstream epoxy resin market helps offset the decline in the plasticizer market.

A key raw material for Naphthalene production, coal tar prices have not shown significant movement during July 2024. The balanced state of the coal tar market keeps production costs in check. This prevents any significant upward pressure on the imported price to settle at USD 910/ MT Naphthalene Refined CFR Qingdao, China on 12th July 2024. The coking coal market, another factor influencing supply, remains stable. Coal enterprises were actively releasing their inventory, ensuring a steady flow of raw materials for Naphthalene production without any major disruptions. Downstream steel mills, major consumers of coke, have experienced market pressure, leading to cautious procurement practices. This translates into a stable demand for coke, indirectly impacting Naphthalene production. Furthermore, China, a major importer of Naphthalene from Japan, largely depends on this nation to meet its domestic demand. China was consequently provided with quotes as long as the costs in Japan remained unaltered.

The primary downstream users of Naphthalene, Phthalic Anhydride, and plasticizer markets have experienced a decline in demand. This could have put downward pressure on prices. Meanwhile, the downstream plasticizer market was down, the epoxy resin market has not shown significant fluctuations. This creates a balancing effect, preventing a major demand drop for Naphthalene. With lower profit margins in downstream Phthalic Anhydride production, industry players are cautious about raising raw material costs. Market participants were adopting strategies to navigate this period of decline. Their focus lies on balancing production costs with maintaining a stable supply chain for Naphthalene.

As per ChemAnalyst, the Naphthalene prices in China may face an upward trajectory in the upcoming weeks due to potential disruption from other Asian countries amidst heavy floods and rainfall. The heavy floods and rainfall in the neighboring country could damage infrastructure, hinder transportation, or even force production facilities to shut down. This would restrict the flow of Naphthalene into China, creating a shortage.