31 October 2011 00:00 [Source: ICB]
Orthoxylene (OX) is the second-largest of three commercial isomers of xylene. Nearly all OX output is consumed in the manufacture of phthalic anhydride (PA). PA has three major applications: as phthalate plasticizers used in compounding polyvinyl chloride (PVC); in unsaturated polyester resins (UPRs) for glass-reinforced thermoset engineering applications; and in alkyd resins used for surface coatings.
Smaller outlets for OX are in solvents, though that is declining, and in bactericides, soybean herbicides and lube oil additives. A newer outlet is in the production of polyethylene naphthalate (PEN) polymer.
PA has the most significant influence on OX markets, and demand in the US has lately been weak. This is due, in some part, to a weak PVC market, the main consumer of PA. PVC has been slow because of the still struggling housing industry. In addition, health and environmental issues surrounding the use of phthalates in plasticizers for PVC can be expected to hinder future growth.
Growth in UPRs, the second-largest consumer of PA, is tempered by saturated major end-use markets, including construction, marine and transportation. The third-largest outlet for PA, alkyd resins, have been in a slow decline due to limits in the level of volatile organic compounds in surface coatings, which has led to a switch to water-based and powder coating technologies.
The November contract price for OX in the US was nominated up 5 cents/lb ($110/tonne, €79/tonne) from the contract price in October of 65 cents/lb in the week ended October 21. The 65 cents/lb October contract was a dip of 0.5 cents/lb from the September contract.
A buyer said the nomination at 70 cents/lb FOB (free on board) USG (US Gulf) was unrealistic and expects the OX contract to instead fall in November based on lower mixed xylene (MX) prices. The OX contract usually settles early in the month, after the MX contract has been been finalized.
Producers initially nominated contract hikes of 2.5-6.5 cents/lb.
ICIS assessed US OX spot prices as stable in the week ended October 21, at 66-68 cents/lb FOB export.
Downstream, November PA prices were expected to track the 0.5 cent/lb decrease in the October OX contract, as PA contract prices normally move in line with the previous month's OX price.
The US MX spot market was said to be quiet throughout the week ended October 21, with no deals heard. Prompt MX traded most recently at $3.90/gal FOB on October 12, and spot prices were assessed stable in the range of $3.90-4.00/gal FOB, according to ICIS.
OX comes from the production of mixed xylenes, which involves the high-severity catalytic reforming of naphtha. From this, a C8 stream contains ortho-, meta-, and paraxylenes, as well as ethylbenzene (EB).
Xylenes are also obtained from the pyrolysis gasoline stream in a naphtha steam cracker and by toluene disproportionation. The xylenes are passed through a splitter, and the bottom stream, which contains a targeted amount of OX, is sent to an OX distillation column to produce high-purity product.
Downstream demand is slow and economic uncertainties plaguing the US market will influence OX prices in the short term. The outlook for this market is dominated by the eventual recovery of the PA market, which remains heavily dependent on the construction industry. The PA sector has been characterized as being currently oversupplied and in need of further rationalization.
In comparison, OX in Europe is expected to see little change in its supply/demand balance in the short to medium term. But, the European OX market could be impacted by a shift away from the use of dioctyl phthalate (one of the main plasticizers made with PA) to alternative plasticizers.
The shift is partly due to concern over the health effects of phthalate plasticizers. The European Parliament has prohibited the use of six phthalates for the softening of PVC in toys.
Meanwhile, in Asia, OX projects are under consideration, such as Jurong Aromatics in China. Both Chinese and South Korean investors are building a 200,000 tonne/year facility in Singapore that is scheduled for completion in 2014. The main value driver of this project is the production of OX, as well as paraxylene and benzene, to serve the Asia Pacific market.
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