Lower Western gasoline demand helps paraxylene

Chemical companies, Consumer demand, Economic growth, Futures trading, Oil markets

PX Jul10.pngParaxylene (PX) has been a great petchem success story over the past 30 years. This 4th post in the blog’s series looks back at its history, and discusses how its future may develop.

It is hard to remember that back in the 1970s, DMT (dimethyl terephthalate) was the main polyester material. But the superior properties of PTA (terephthalic acid) led to dramatic growth for polyester and hence in PX demand. More recently, major growth in the use of PET (polyethylene terephthalate) for bottles has further increased demand.

This growth was even more remarkable when set against the sourcing problems associated with PX. It required xylene (or toluene for MSTDP), to be ‘bid away’ from gasoline, and the octane pool. This was very difficult, as refiners would never allow gasoline stations to run short, whatever the alternative value into PX.

The blog spent several years experiencing these problems at first hand with ICI, then the No 2 PTA producer – first in the UK and then in Houston, Texas. A period of low prices often meant refiners simply stopped xylene extraction. This led to PTA producers placing a high priority on security of supply issues, rather than absolute price.

More recently, however, the blog suspects that markets are moving more in favour of PX producers. As the chart above shows, PX normally trades at a spread of $200/t – $350/t versus naphtha. And whilst the spread continues to have 10 year ‘peaks’, it has recently been far less volatile than benzene.

Lower Western gasoline demand should lead to improved toluene and xylene availability. And so, whilst benzene is becoming less of a genuine market, PX is moving in the opposite direction. It may, after all these years, finally develop a genuine supply/demand balance of its own, only partially related to gasoline.

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Benzene develops security of supply issues

13/07/2010

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Petchem supply/demand enters the New Normal

15/07/2010

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