By John Richardson
ASIAN aromatics producers are struggling from an oversupply driven both by weak demand for their products and strong overall reformer economics, the blog has been told.
As this chart below illustrates for benzene, toluene and xylenes (BTX), the price declines for these base chemicals mirror those we have reported on extensively in the olefins chain.
The weaker demand outlook in China is impacting BTX and its derivatives after the strong growth seen in 2009.
Additionally, weaker naphtha pricing and higher octane differentials between the 92 and 97 grades of gasoline point to strong reformer operating rates over the next few weeks, says N Raviventatesh, Singapore based consultant with Purvin & Gertz in his latest Asian petrochemicals feedstock report.
This report from ICIS news points to a moribund naphtha market dogged by increased supply and weaker demand due to the Formosa Petrochemicals cracker outage, with crack spreads the weakest for all the refinery products.
China has also added a lot of refinery capacity of late and has become a more significant exporter of gasoline as it runs its refineries hard for what my fellow blogger Paul Hodges describes as “social stability and job-creation reasons”.
BTX values could therefore suffer further, as has so often been the case in the past, from factors beyond the control of the chemicals industry.
But as Ravivenkatesh points out, his assumption of high reformer operating rates depends on no significant cutbacks in naphtha production.
And with cracker margins still on the decline in Asia, we seem to be getting close to the point of cracker rate cuts – by possibly as early as August. This would further help to rebalance BTX markets through less availability via pygas.