OUTLOOK ’11: Asia PX/OX supply to remain tight due to turnarounds

29 December 2010 08:19  [Source: ICIS news]

By Bohan Loh

SINGAPORE (ICIS)--The demand-supply balance for Asian paraxylene (PX) and orthoxylene (OX) is likely to remain generally tight in the first quarter of 2011 due to a series of scheduled turnarounds, sources said.

According to data compiled by ICIS, seven Asian PX facilities with a combined nameplate capacity of 3.02m tonnes/year will be shut within the first quarter of 2011 (see table below, which includes the Aromatics Malaysia plant that suffered an outage on Christmas eve and is being repaired).

“Supply is already tight for the January and February delivery months. With so many turnarounds scheduled just for the first quarter, it will be likely that deliveries for March and April would be tight as well,” said a northeast Asia-based trader.

The settlement of the January PX Asia Contract Price (ACP) at a 28-month high on 28 December underscored the tightness in supply, said sources. The January PX ACP was fully settled between the relevant buyers and sellers at $1,380/tonne (€1,049/tonne) CFR (cost & freight) Asia, up $105/tonne from the December ACP of $1,275/tonne CFR Asia.

“The tightness in supply is unlikely to be eased by Urumqi Petrochemical’s start-up,” said another regional trader.

Urumqi Petrochemical reported on-spec production at its new 1m tonne/year PX unit located in the northwest Xinjiang province on 28 December after a delay of more than three months.

The company had planned to deliver PX by rail to Shandong and Dalian before loading the molecules onto vessels which would then be delivered to PTA makers in eastern China, mainly Zhejiang and Ningbo.

“It would take around 15 days by rail from Urumqi to Dalian and 13 days to Shandong. On top of that, there will be considerations for temperature controls if the cargo is a flammable petrochemical,” said a source from railway information provider, China Railways.

“On top of that, I do not think there are facilities that can support logistics for 1m tonnes of PX at the moment,” he added.

Other market players cited the recent move by ExxonMobil to include a spot component in its term contract formula for 2011. ExxonMobil has proposed a 70% ACP:30% spot average of published CFR Taiwan prices, as a term formula for 2011 to the relevant ACP-linked buyers, instead of a 100% ACP formula base.

Some traders saw the move as an attempt to capture an anticipated upswing in spot prices for 2011. According to historical data from ICIS, spot prices typically lead contract values in a tightly supplied market.

Most OX players are also expecting the regional market to stay tightly supplied for 2011 on the back of expectations for buoyant PX prices.

“Makers are likely to remain focused on producing PX because that’s where the margins will be for 2011,” said one northeast Asian OX maker.

The supply-demand balance for OX in Asia has been tightening gradually during the fourth quarter of 2010 as margins for PX production surged. Most northeast Asian producers had implemented cutbacks in OX operations in order to maximise PX production.

OX is a co-product extracted during PX production. Petrochemical makers will typically maximise production of either product depending on prevailing economics.

($1 = €0.76)

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By: Bohan Loh
+65 6780 4359

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