Europe chemical profile: orthoxylene

07 May 2012 00:00  [Source: ICB]

Orthoxylene (OX) is the second-largest of the three commercial isomers of xylene. Almost all OX output is used to make phthalic anhydride (PA), which is used in phthalate plasticizers.

Small quantities are used in solvent applications and to make bactericides, soya bean herbicides and lube oil additives.

Chemical Profile 

 Chemical Profile

Supply has tightened globally and demand is better for contract, spot and export than it was towards the latter part of 2011 and early 2012. Iran's Petrochemical Commercial Co said it was going to cut its OX exports by more than half in 2012 to between 15,000-16,000 tonnes, which was expected to exacerbate the tight supply situation. Buying interest for spot material is at a good level, but there is little to no availability in Europe. Most available OX volumes are going into contracts, and any extra supply is very quickly absorbed.

The derivative phthalic anhydride (PA) market is balanced to tight, and is expected to become tighter because of difficulties in sourcing OX amid good demand. Export demand for PA is healthy with a particularly good level of enquiries from Africa, Turkey, India, the Middle East and Asia. Contract prices in the PA market are now at a record high because of firm OX costs. PA producers are currently able to pass on increases, but fear that additional hikes will be difficult to absorb further down the chain.

Prices are influenced to a large degree by those for gasoline. European contracts settled at a record high of €1,180/tonne FD (free delivered) NWE (Northwest Europe) in April, up by €50/tonne from March, in line with global pricing, and because of limited availability and healthy demand.

Spot numbers have risen sharply since December 2011, and reached their highest level in April at $1,640-1,680/tonne FOB (free onboard) Rotterdam, largely driven by tightness. Despite good buying interest, few spot transactions are taking place, owing to a lack of spare molecules.

Although derivative demand from the PA sector is currently healthy, prices remain increasingly difficult to pass on downstream. Some sources expect May OX contract prices to rise further.

Mixed xylenes (MX) are produced by high-severity catalytic reforming of naphtha from which the C8 stream contains ortho-, meta-, and paraxylenes (PX), as well as ethylbenzene (EB).

Xylenes are also obtained from the pyrolysis gas (pygas) stream in a naphtha steam cracker and by toluene disporportionation (TDP). The xylenes are passed through a splitter where the bottom stream, with a targeted amount of OX, is sent to a distillation column to produce high-purity product.

In the second quarter, the OX market in Europe is likely to stay tight with healthy demand. Approximately 20% of OX capacity will be out in May as some plants will undergo planned maintenance turnarounds. Producers are monitoring feedstock costs and prices in other regions, and expect prices to remain steady to firm if consumption levels are stable.

Although demand from the PA sector is healthy, offtake from this industry is largely dependent on the construction industry. Concerns surrounding the weak and uncertain global economic environment have resulted in a lack of consumer confidence and less spending in the public and private sectors. While demand from the construction sector has picked up, consumption levels are well below 2011 levels.

While the outlook appears healthy, there is little visibility and participants question whether prices at the current level are sustainable. No future investment in OX is likely in Europe. In December 2011 Italian producer Versalis (formerly Polimeri Europa) announced that it intends to focus on PX at its site in Sarroch. Instead of producing OX, PX and metaxylene, the plant will produce PX. The project is expected to be completed by the end of 2013. Only two OX projects are planned globally. Byco Oil Pakistan is building the country's first aromatics facility, including 50,000 tonnes/year OX, with startup due in mid-2013. A 200,000 tonne/year plant is also due on stream in Singapore in the first quarter of 2014.

Author: Helena Strathearn and Elaine Burridge

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