FocusAsia isomer-grade xylenes seen firm on tight supply from US

14 September 2012 05:21  [Source: ICIS news]

By Hazel Kumari

SINGAPORE (ICIS)--Asia isomer-grade xylenes (IX) prices have gained by 7.36% since the start of the month and are likely to remain firm in the near term on tight supply from the US and strong upstream-downstream markets, industry sources said on Friday.

Both upstream crude prices and downstream paraxylene (PX) and purified terephthalic acid (PTA) have firmed up since last week.

PX prices rose by $89-94/tonne (€68-72/tonne) to $1,560-1,570/tonne on 13 September from $1,471-1,476 on 6 September while PTA firmed up $1,090-1,095/tonne on 13 September from $1,045-1,060/tonne on 6 September.

Spot IX prices were assessed at $1,335-1,340/tonne FOB (free on board) Korea on Friday morning, their highest level seen since 16 March 2012 when it was at $1,340-1,345/tonne, according to ICIS.

“There are no new MX [mixed xylenes] suppliers in the market but many buyers are trying to cover short positions for October,” a South Korea-based trader said.

Mixed xylenes have two main grades, solvent xyelene (SX) and IX.

“Supply basis FOB Korea is short, tight, and I am having troubles finding a [IX] seller,” he said adding supply will further tighten when China’s Dragon Aromatics starts up.

China’s Dragon Aromatics is aiming to start up its Fujian-based PX/ orthoxylene (OX) unit in October after China’s National Day week-long break starting from 1-7 October.

The PX/OX unit, located in Zhangzhou, near Xiamen, has a nameplate capacity of 1.6m tonnes/year of PX and 240,000 tonnes/year of OX and will require feedstock IX in huge quantities.

Despite a firmer downstream PX market, some regional traders were of the opinion that current prices of IX were unsustainable.

“PTA makers are suffering from the constant price hikes in PX and have started production cutbacks in Taiwan, Korea and most recently China,” a southeast Asia-based trader said angrily.

“End-users’ demand for PX is weaker and the market is all based on speculations right now,” he added.

Asia’s PTA prices have seen a price hike this week – rising by $31-35/tonne - because of pre-holiday restocking and tight supply in China.  

PTA makers are lamenting that PX prices are too high with some producers’ margins squeezed into the negativity.

In Europe and the US, problems in domestic production may also lead to stronger demand for Asian IX, further tightening supply in this region.

Market players were looking at the feasibility in supplying the US market in the near future. Currently, MX prices in US closed at $4.45-4.50/gallon FOB Barges or equivalent to $1,353.45-1,368.95/tonne on 12 September. 

“Troubles in the US market with the oil majors are affecting Asia…US traders sold cargoes domestically and are looking to buy from Asia instead. Mixed xylenes (MX) supply will be tighter in the near future,” said a South Korea-based trader.

In Europe BP has declared force majeure (FM) on its PTA and PX production out of Geel, Belgium on 5 September, because of problems impacting upstream availability.

“BP shipped 15,000-20,000 tonnes MX from USG to Europe so they can keep their PX plant running in Europe. Hence, now USA is even tighter [on supply in the spot market],” said a trader from a US-based company.

Asia is typically short of about 1million tonnes of IX every year and is highly dependent on US’s shipments, said a key Japanese IX buyer.

The region imports between 50,000-80,000 tonnes MX a month from the US into Korea, Taiwan and China.

Main IX sellers in the spot market in Asia include South Korea’s GS-Caltex Oil Corp and SK Energy; Japan’s Cosmo Oil; India’s Mangalore Refinery and Petrochemicals Ltd; Malaysia’s Petron, and Thailand’s Integrated Refinery and Petrochemical Complex (IRPC).

The rest of the Asian producers use IX for their own PX production and end up having to buy on the spot market.

These include South Korea’s Honam Petrochemical Corp (HPC), LG Chem, Yeochun NCC (YNCC); Japan’s Tonen Chemical Corp, JX Nippon Oil & Energy Corp, and Taiwan’s CPC Corp.

($1 = €0.77)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Hazel Kumari
+65 6780 4327

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