Asia’s isomer-grade xylene spot prices hit a 19-month low on 21 February on the back of weak market conditions in the downstream paraxylene (PX) and purified terephthalic acid (PTA) sectors, according to ICIS data.
Spot prices of isomer-grade xylene prices were assessed at $1,085-1,090/tonne FOB (free on board) Korea on 21 February, the lowest level since 4 July 2012 at $1,085-1,100/tonne FOB Korea, the data showed.
Isomer-grade xylene prices have been under downward pressure as persistently weak downstream demand continued to plague the market, and the market outlook remains bearish amid limited signs of a recovery in the near term.
Weak China economic data released on 20 February led to a bearish market sentiment which in turn put a downward pressure on discussions during the week.
HSBC’s flash manufacturing purchasing managers’ index (PMI) for China was at a seven-month low of 48.3 in February, down from its final reading of 49.5 in January, reflecting a contraction in manufacturing activities.
Furthermore, two major PX producers, South Korea’s Hyundai Cosmo Petrochemical (HCP) and Lotte Chemical, were sitting on surplus feedstock inventory because of production cutbacks since August 2013 and were seen offering their excess in the open trading arena, clouding market outlook.
In early February, South Korea’s Hyundai Cosmo Petrochemical (HCP) further reduced operating rates at its 800,000 tonne/year PX unit to 75% from 80-85% in January.
South Korea’s Lotte Chemical’s 250,000 tonne/year No 1 PX unit remains shut with no immediate plans of restarting.
“The downstream sectors are so weak that the market has changed drastically over the last six months. End-users have switched roles from being a buyer to a seller, confusing the market outlook even more,” a northeast Asia-based trader said.
Moreover, further downstream polyester sector has been persistently weak, with sales-to-output ratio consistently at below 100% since end-January. When the sales-to-output ratio is below 100%, there will be a build-up in inventories, according to market sources.
Consequently, polyester makers have no interest in procuring additional feedstock PTA cargoes. The weak buying interest affected both upstream PX and isomer-grade xylene players.
Adding to the bearish sentiment, there was talk in the market that a handful of PX producers were contemplating further cutbacks in production rates at their plants because of persistently poor PTA demand.
“If more isomer-grade xylene-based PX plants reduce their operating rates, the market would be over saturated with cargoes, meaning there will be more sellers than there are buyers. [Isomer-grade xylene] prices are bound to slide further,” another northeast Asia-based trader said.