Around 97% of demand for PX comes from the polyester chain via one of its intermediates: purified terephthalic acid (PTA) or dimethyl terephthalate (DMT).
The bulk of PX in Asia is being used in China because of the country being a key PTA producer. China’s total PTA capacity currently stands at around 40m tonnes/year.
Since the end of last year, PX market participants were bracing themselves for a tough 2014, especially for the second half, on new PX capacity expected to come on-stream from that period onwards.
In 2014, a total of 6.97m tonnes/year of new PX capacity will be added into the Asia supply pool, on the back of squeezed margins faced by downstream PTA producers.
Out of the 6.97m tonnes/year of new PX capacity, 3.3m tonnes/year will be coming out of South Korea, 1.25m tonnes/year from China, 800,000 tonnes/year from Singapore, 700,000 tonnes/year from the Middle East, and 920,000 tonnes/year from India.
Weak downstream PTA demand is expected to continue, with average PTA operating rates being expected to dip, curbing demand for PX cargoes.
This will in turn change the market dynamics, turning a fundamentally short PX market, into a balanced-to-long market because of the new capacity.
However, due to underperformance from the polyester chain, existing PX facilities started to cut their operating rates, or kept their units shut, in anticipation of the new capacity coming onstream.
Asia PX spot prices started to spiral down from the beginning of 2014, touching lows of $1,174/tonne CFR CMP in the middle of May 2014, from the January 2014 level of $1,376/tonne. This downtrend was largely caused by weak demand from the downstream sectors, with operating rates at PTA facilities being reduced to 55% in key China markets.
On the contract front, the Asian Contract Price (ACP) was filled with dispute during the year because of contrasting market outlooks held by buyers and sellers. This made it difficult for negotiations to result in a unanimous agreement on a single price.
So far in the year, there had only been a single major settlement in January at $1,415/tonne CFR Asia, while no settlements could be reached from February to July.
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.
Processes have also been developed using a zeolite catalyst for the alkylation of toluene with methanol to produce PX without benzene co-product.
The outlook for the second half of 2014 is riddled with uncertainty about the impact on prices, supply and demand as a result of the start-ups of the new PX capacities in Asia. The remaining start-up and delivery dates from these new plants have been a key factor in the uncertain outlook.
Market participants have adopted a cautious stance since the start of the year. Trading volumes compared to last year were cut by almost half, as players were trying to mitigate risks on the back of an unclear price outlook.
PX players have been monitoring closely the recent implementation of a cost-linked formula for PTA pricing in the key China market in June.
If the cost-linked formula remains successful in the PTA markets from July onwards, market confidence in the PX sector will be boosted, leading to a healthier polyester chain. PX demand will also be supported towards the end of the year, following expansion plans to continue forth towards the end of the year.
By the end of 2014, 6.15m tonnes/year of new PTA capacity is expected to come on stream.