16 October 2000 00:00 [Source: ICB]The orthoxylene market is greatly dependent on the demand for phthalic anhydride, but growth rates in Europe look low. Until the PA market is stabilised orthoxylene's future is difficult to gauge
European orthoxylene is said to have had a disappointing year so far. Demand growth, which was expected to be close to 3%, has been nearer to 1%.
West European orthoxylene supplies have been affected by the closure of Shell's 100 000 tonne/year unit in Godorf, Germany.
The shutdown of the plant has reduced West European orthoxylene capacity to about 600 000 tonne/year. The plant closed in the second-half of 1999 as it was no longer seen as economically viable or competitive.
However, market observers note that the Shell shutdown has been counterbalanced by the failure of the troubled phthalic anhydride (PA) producer Sisas to take up its quota of orthoxylene. Sisas's 110 000 tonne/year PA unit at Ostend is closed at present and the 100 000 tonne/year Feluy unit is believed to be operating below nameplate capacity.
It is generally accepted that orthoxylene supplies are currently outstripping demand. Russian orthoxylene producers are believed to have been more active in 2000, exporting 100 000 in the first half of the year. The Russians have been active in both spot and contract markets.
Orthoxylene is primarily used to manufacture phthalic anhydride, although small quantities are used in solvent applications and in bactericides, soya bean herbicides and lube additives.
Mixed xylenes are produced by severe catalytic reforming of naphtha producing a C8 stream containing para-, meta- and orthoxylene and ethylbenzene.
Xylenes can also be contained from the pyrolysis gasoline stream in a naphtha streamcracker and by using toluene disproportionation. The xylenes are passed through a splitter where the bottom stream is sent to an orthoxylene distillation column to produce high purity product.
Health & safety
Xylenes can irritate the eyes, nose and throat. High levels can cause dizziness, passing out and death while repeated exposure may damage bone marrow.
Recommended airborne exposure limit is 100ppm over 8 hours. Xylenes are flammable liquids and poisonous gases are produced when burnt.
European orthoxylene contract prices have moved up steadily throughout the year. In quarter one the price was fixed at E410/tonne. The recently concluded fourth quarter contracts were settled at E510/tonne.
Although industry sellers pushed numbers higher by E59/tonne in the third quarter and E11/tonne in the fourth quarter, there is a great deal of disappointment with contract price levels. Orthoxylene producers feel contract prices do not reflect the severe increase in naphtha and gasoline prices seen in recent months.
PA producers' resistance to higher prices, due to pressures on their own margins, is one factor behind limited price jumps.
European spot business has not been particularly active, and is being viewed as lacklustre particularly since the summer.
At the beginning of the year spot orthoxylene prices stood at $390-395/tonne fob NWE. Spot prices had moved up to $440/tonne by the end of quarter two. Currently spot numbers are quoted at $440-450/tonne fob NWE, although spot business is described as extremely thin.
The European customer base for OX is facing upheaval, with major restructuring among phthalic anhydride producers expected in the coming months. The future of Europe's largest OX consumer Sisas is in some question, with speculation of closure and take-over rife.
BP is to close its 80 000 tonne/year PA unit in Hull, UK, in the first half of next year. A site revamp could see the closure of Driftal's 20 000 tonne/year unit in Portugal.
European orthoxylene is expected to experience minimal growth in coming years. But it is difficult to assess its future until the re-organisation in phthalic anhydride is complete. If Sisas, BP and Driftal exit the PA market, demand for orthoxylene will fall. It will become difficult to sustain orthoxylene with domestic demand and the search for export opportunities will intensify.
|Petro Borzesti||Borzesti, Romania||8|
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