OUTLOOK ’18: Asia PX market to be robust in Q1 on downstream PTA run rates

SINGAPORE (ICIS)–Asia paraxylene (PX) market is expected to be robust on the back of higher run rates in the downstream purified terephthalic acid (PTA) plants in the first half of this year.

However, PX market will hinge on the balance between new PX commercial capacities and run rates of downstream purified terephthalic acid (PTA).

In the fourth quarter (Q4) in 2017, some idled downstream PTA capacities restarted and a couple of new PTA plants started up, that will bring about more PX demand in the first quarter (Q1) 2018.

Oriental Petrochemical Taiwan Co (OPTC) started up its Line 3 PTA unit of 1.5m tonne/year capacity in Kuanyin, Taiwan in November, and Jiaxing Petrochemical started up its No 2 2.2m tonne/year in Jiaxing, Zhejiang, China in December.

Idled PTA capacities in China of 3m tonnes/year under Xianglu Petrochemical and 600,000 tonnes/year by Hanbang Petrochemical were restarted in November and December, respectively, and have ramped up to full operating rates.

PTA market conditions were favourable for its producers in the fourth quarter of last year to run their plants at high rates amid tight supply in China and improved PX-PTA spread in the fourth quarter as compared to most of the rest of 2017.

PX-PTA spread improved from below the $90/tonne mark at the start of the fourth quarter 2017 to over $110/tonne at the end of the quarter.

It will take time for PTA inventories to build up, if at all, hence run rates of PTA plants will likely remain on the high side supporting PX demand in Q1 2018.

On the PX supply side, the new capacities under Nghi Son Refinery and Petrochemical and PetroRabigh II were heard to be looking at starting up in end of Q1 and in the second half (H2) of 2018 according to market sources.

Market participants expect commercial PX volumes from the new capacities to only impact the market in H2 2018.

Chemical	Company	Location	Country	Capacity (tonnes)	Startup
Paraxylene	Nghi Son Refinery & Petrochemical	Thanh Hoa	Vietnam	680,000	Q1 2018
Paraxylene	PetroRabigh II	Jeddah	Saudi Arabia	1,250,000	H2 2018

Although PX plant planned maintenances in Q1 2018 do not seem as concentrated as that for maintenances in Q4 2018, the reduced loss of PX production to maintenance in Q1 2018 will be insufficient to cover the expected more PX demand from PTA downstream.

Hence, the Asia PX market is looking to tighten in Q1 2018.

There will be a high concentration of planned maintenances for PX plants in the second quarter (Q2) of 2018, which will likely keep PX supply on the tight side.

Supply will likely lengthen later in the year once there are commercial PX production from the new plants entering the market.

Also, it remains to be seen if further downstream polyester market situation and PTA market conditions after Q1 will be able to sustain high operating rates of PTA capacities later into the year.

Market players are generally cautiously bullish for downstream polyester market demand to be relatively good, though perhaps not as good as it was in 2017.

In 2017 polyester growth saw double digit growth rates, but at least some healthy growth are expected, that will help to support the demand for raw material up the supply chain.

How the PX supply demand balance out in 2018, will also affect the PX-naphtha spread.

The PX-naphtha spread had taken a dip from the low $400s/tonne to near $300s/tonne at the start and end of 2017 respectively due to additional PX capacity in 2017 from Reliance and below expectation demand since several idled PTA plants that were expected to restart only did so much later in the year.

With the upcoming changes in the PX supply demand front expected in Q1, PX-naphtha spread may improve.

And when more changes to the PX market conditions come along later in the year with the upcoming new PX plants, the PX-naphtha spread may re-stabilize at a lower point if demand is unable to catch up.

Outlook article by Hazel Goh