Asia OX may fall on weak buying from key China market

22 August 2014 10:39 Source:ICIS News

Focus story by Hazel Kumari

SINGAPORE (ICIS)--Spot prices for orthoxylene (OX) material in northeast Asia may continue falling because of weak buying interest from China, market participants said on Friday.

A sole deal for OX was heard concluded at $1,190/tonne CFR (cost and freight) China this week, but this could not be confirmed at time of writing.

On 15 August, OX prices were assessed at $1,230-1,250/tonne CFR NE (northeast) Asia, down by an average of $17.50/tonne from the previous week, according to ICIS data.

Losses in co-product paraxylene (PX) and downstream phthalic anhydride (PA) sectors also weighed on buying appetite for OX, they said.

Furthermore, declines in downstream 2-ethylhexanol (2-EH) and dioctyl phthalate (DOP) markets exerted downward pressure on upstream PA spot prices, with the bearish sentiment extending to the feedstock OX sector, according to regional traders.

“2-EH and DOP domestic Chinese prices  have taken a beating during the week. Buyers’ sentiment is bearish right now. No one really dares buy any cargoes as downstream plasticizer demand is weak in China,” a northeast-Asia based trader said.

Most players agreed that supply in the spot market from September would continue to grow, as PA makers were running their plants at around 40-50% of capacity.

Sellers’ sentiment was weakened by a lack of demand from China’s end-users, which were relying on contractual volumes and domestic supply to meet production requirement.

In addition, some Chinese PA producers had installed catalyst in their plants, enabling them to use an alternate feedstock, naphthalene.

Domestic Chinese naphthalene prices were heard to be significantly lower than OX prices, encouraging these PA producers to increase the volume of naphthalene fed into their plant, reducing OX consumption.

“There are no buyers in the market at the moment for OX. PA makers can’t recoup the production costs with OX at its current prices, a northeast Asian producer said.

“Currently, naphthalene prices in China [are] lower than OX prices. Major PA makers are starting to buy naphthalene to lower their costs,” the producer said.

Several market participants also noted that there might be ample supply going forward, with  a new OX plant targeting to start commercial operations in end-August or early-September.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By Hazel Kumari