Chemical Profile: Europe paraxylene

28 June 2013 09:56  [Source: ICB]

Paraxylene (PX) is the largest volume isomer of the mixed xylenes. Its primary demand comes from the polyester chain via one of its intermediates: purified terephthalic acid (PTA) or dimethyl terephthalate (DMT), with about 60% from textiles and about 30% from polyethylene terephthalate (PET) packaging resin.

A small amount of PX is used as a solvent and to produce di-paraxylene and herbicides.

European demand has been quiet throughout 2013 because of poor downstream market conditions, but this has been counteracted by balanced availability outside of contractual volumes, as domestic producers optimise run rates. Producers in Europe have been very cautious with run rates this year to avoid oversupply.

Several producers in the market have also actively sought to ship material from Europe to both the US Gulf region and South America this year to help keep domestic availability balanced amid slow derivative offtake.

Several recent turnarounds in the PTA market have kept PX availability from tightening too much in Europe, which has also led the monthly contract price to come down significantly.

Globally there has been some expectation that PX will tighten following the start-up of numerous PTA plants in China. Asia's PTA capacity is expected to reach 69m tonnes/year in 2015, a 60% increase from 2011.

2013 opened with some inventory restocking, which renewed optimism among European PX players, but this was short-lived. Key end-use sectors have generally been slow to recover this year, which has limited PX offtake.

The undue influence of the dominant Asian PX sector on European pricing trends has continued this year, despite differing market fundamentals and production economics.

Combined with bullish energy and feedstock costs, rising Asian prices have often carried over into Europe despite slower activity in the derivative markets, further capping any potential demand recovery.

The first quarter of 2013 saw steady increases for the European PX contract in line with Asian price developments, despite no corresponding gains in derivative demand.

Some uncertain direction and spot volatility from Asia, including several months when no clear monthly contract was agreed between the major settlers, created confusion in the European market as 2013 unfolded.

A sharp drop in Asian pricing in March led European numbers to edge downwards. This was followed by a sharp €130/tonne drop in the April settlement, with buyers keen for the contract to reflect domestic market conditions.

Sellers in the spot market have been resistant to lowering offers below contract price levels, arguing that there is no incentive to do so amid limited demand for spot volumes, although the upcoming summer months could see a shift in this regard.

Lower feedstock costs could also see PX spot prices come down while sellers maintain a healthy margin.

Conventional technology is based on the isomerisation of mixed xylenes from refinery reformate streams or from pyrolysis gasoline (pygas). High-purity product can be obtained using crystallisation or selective adsorptive separation.

Toluene disproportionation offers an alternative route, with the latest catalysts able to produce a PX-rich stream, but this route co-produces benzene. Processes have also been developed using a zeolite catalyst for the alkylation of toluene with methanol to produce PX without benzene co-product.

The Cyclar process converts propane and butane to PX and benzene.

With PX almost exclusively consumed by the polyester chain, the fortunes of the market will greatly depend on PTA demand.

In Europe, the downstream PTA market is experiencing some shortage as a result of reduced output on the back of poor margins. Following several months of low demand, the pull for PTA from downstream PET has started to pick up following a lacklustre 2013 so far.

However, the wider macroeconomic unease has tempered any growing bullishness moving into summer, traditionally the strong season for the PET market.

There is some expectation among European traders that PX spot activity could pick up should the bearish trend on oil and energy futures continue, as this would put downward pressure on domestic pricing and help loosen up spot availability for export purposes.

By: Truong Mellor
+44 208 652 3214

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