OUTLOOK ’18: US MX to soften, trade deficit to increase in 2018

Lucas Hall


HOUSTON (ICIS)–US mixed xylenes (MX) prices are expected to continue softening into Q1 2018 after experiencing some elevation in the latter half of 2017, owing to production issues faced in the refining industry.

Elevated MX prices seen in Q3 2017 associated with production issues caused by Hurricane Harvey in the US Gulf have started to fall in Q4 2017 and are expected to continue decreasing into Q1 2018 as refineries make up for production losses associated with the storm.

Although refineries in the US traditionally run at lower rates in the winter months due to seasonally slower gasoline demand compared to the spring and summer months, operating rates in 2018 may be somewhat higher than usual as producers double their recovery efforts following the impact of Harvey in the second-half of 2017.

As such, MX supplies are expected to somewhat increase despite healthy availability in the market, further dampening already depressed demand for product amid what is traditionally the low season for MX.

Demand for MX is expected to then more broadly soften as gasoline prices continue to drop to more seasonable levels and the market adjusts to winter gasoline requirements, during which gasoline blenders often opt for butane as a blendstock rather than traditionally more expensive toluene and xylenes.

Meanwhile, domestic demand for paraxylene (PX), which accounts for the largest volume isomer of MX, is unclear as the market grapples with the effects of both Harvey on production levels in the US Gulf and the bankruptcy of downstream polyethylene terephthalate (PET) resin producer Mossi & Ghisolfi (M&G).

PX prices as a result rose in the latter-half of 2017, further supporting MX production for PX demand as PET producers rebuild inventories lost due to the storm and seize on M&G’s losses. This trend has the potential to carry into 2018,

Moreover, PX prices in Asia, which accounts for the bulk of PX demand due to growing downstream polyester fibre demand, have also risen, further supporting MX production for PX demand.

According to ICIS data, PX accounts for more than 80% of chemical demand for MX, with the share expected to continue to grow in the years ahead.

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Lastly, the MX market faces further softening as the US increasingly shifts from a net exporter to a net importer of MX due to increasing MX and PX capacities worldwide, particularly in Asia.

According the US International Trade Commission (ITC), US exports of MX are down year on year as of October.

The US is expected to remain a net importer of MX for the foreseeable future, putting further downward pressure on domestic MX prices.

MX can be used as a gasoline component in fuels to boost octane, as a chemical feedstock or as a solvent. Its use as a solvent, a small part of the MX market, has little effect on MX prices, which are usually driven by octane and chemical demand.

As an octane component in fuels, MX is in its strongest demand season during the summer, when fuels must be less volatile. During the winter, fuel blenders can use less expensive octane boosters like butane. The summer fuels season runs through mid-September.

As a chemical feedstock, MX is most often used to produce PX for the polyethylene terephthalate (PET) chain, which has its strongest demand season during northern hemisphere summers.

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Major US toluene producers include ExxonMobil, Flint Hills Resources, Total, Valero, Marathon Petroleum, Shell and Phillips 66.


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