Price and market trends: Isomer-grade xylene supply likely to tighten in Asia

11 January 2013 11:33  [Source: ICB]

Confidence in spot is strong for the first quarter of 2013 thanks to restocking in the run-up to the Lunar New Year holiday

The supply of isomer-grade xylene in Asia is likely to be tight in 2013 because of additional demand from new downstream paraxylene (PX) units scheduled to start commercial production in the first half of the year, said market participants.

Restocking ahead of Lunar New Year will give a lift to demand

Copyright: RexFeatures

South Korean producer HC Petrochemicals is expected to start commercial operations at its PX unit in Daesan by the end of January. It would be able to produce about 800,000 tonnes/year, according to a company source.

HC Petrochemicals is a 50:50 joint venture between Japanese refiner Cosmo Oil and South Korea's Hyundai Oilbank formed at the beginning of 2010.

In anticipation of the new PX unit, Cosmo Oil has installed a mixed-xylene distillation unit at its refinery in Yokkaichi, Mie Prefecture, Japan. The unit has the capacity to extract 300,000 tonnes/year of mixed xylenes from feedstock reformate and would be used as a raw material in the new PX unit.

Regional market participants believe that isomer-grade xylene supply will tighten further upon the PX unit's commercial start-up as HC Petrochemicals' unit will require around 960,000 tonnes/year of the feedstock to run at 100% capacity, amounting to a shortage of about 55,000 tonnes/month of isomer-grade xylene.

Similarly, demand in China is forecast to strengthen as Dragon Aromatics is expecting to start commercial operations at its new facility in Fujian in the first half of 2013. The plant has a nameplate capacity of 1.6m tonnes/year of PX and 240,000 tonnes/year of orthoxylene (OX).

Another Chinese PX producer, Dalian Fujia Dahua Petrochemical, will be increasing the intake of feedstock isomer-grade xylene because of its impending expansion plans in 2013. Chinese oil major Sinopec is said to be providing Dalian Fujia Dahua with raw material, but it is unknown what the contracted volume would be, a regional producer said.

Market confidence in the spot trading arena is strong for the first quarter of 2013 as most participants are expecting some restocking activity to emerge among regional end-users in the run-up to the Lunar New Year holiday in February.

Regional traders have already started purchasing January and February shipments, in anticipation of tight supply. At least six isomer-grade xylene deals were heard transacted at $1,270-1,415/tonne (€965-1,075/tonne) FOB (free on board) Korea for the month ended 19 December, ICIS data show.

Nonetheless, prices are expected to be volatile in 2013 depending on market conditions, which are linked to the Chinese ­economic outlook, with some participants saying that isomer-grade xylene prices may decline in line with the PX and purified terephthalic acid (PTA) markets, which could soften in 2013.

Existing PTA plants without fully integrated facilities may be shut as a result of negative margins due to high production costs that stem from costly feedstock PX. This will leave only a few major PTA producers, with modernised units, who will be able to continue their operations. Thus, with fewer PTA units in operation, there will be more availability of feedstock PX. This, in turn, will translate to a surplus of feedstock isomer-grade xylene, they said.

However, most market participants said prices are more likely to rise in 2013 on the back of the persistently tight supply of isomer-grade xylene and PX in Asia.

In addition, there are no start-up or expansion plans for refineries or reformate distillation units in 2013 to supply feedstock isomer-grade xylene to the three new PX plants. This will worsen the supply shortage of isomer-grade xylene, said participants.

Isomer-grade xylene prices are also expected to increase because the improved Chinese economy, which is reportedly poised to strengthen further in 2013, will encourage the smaller PTA makers to continue running their plants at higher rates.

As a result, the demand for feedstock PX will rise in 2013, therefore increasing the demand for isomer-grade xylene, market participants added.

By: Hazel Kumari
+65 6780 4327

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