US-NE Asia mixed xylenes arbitrage window opens for first time in years

SINGAPORE (ICIS)–The US-to-northeast Asia arbitrage window for mixed xylenes (MX) has re-opened after several years thanks to the collapse of aromatics prices in the US amid the coronavirus pandemic, while demand in Asia is comparatively stronger.

On 6 April, a spread of $85/tonne was seen between MX prices in the US at 0.88 cts/gal or around $270/tonne FOB (free on board) US Gulf; and in Asia at $355/tonne FOB Korea.

Freight between US and Asia was estimated at $70-80/tonne.

Other sellers in the US were still offering MX for prompt loading, with a discount on the reported prices due to poor outlook in the US market, according to market participants.

South Korea’s Lotte Chemical bought a mixed xylene cargo of 30,000-40,000 tonnes loading from the US in April, which is expected to arrive in end-May.

Other regional end-users are mulling spot purchases from the US as well.

Into second quarter, supply of MX in Asia is likely to tighten due to several upcoming turnarounds.

Company	Location	Capacity (tonnes/year)	Time	Duration
Cosmo oil	Chiba, Japan	270,000	End Apr-June	2 months
Taiyo oil	Kikuma, Japan	700,000	June-July	2 months

The trade flow has completely reversed from a month-and-a-half ago, when the northeast Asia to the US arbitrage window opened.

Trade flows have changed rapidly since the global outbreak of the novel coronavirus, which was believed to have originated in China in December 2019.

The epicentre of the pandemic has shifted in March to the west, with more than 1m people infected globally.

The pandemic led to weak fuel demand, which drove down prices of mixed xylenes in Asia to their lowest in more than 17 years.

The extent of decline in Asia was less than that in the US, where prices were weighed down by US unleaded gasoline hitting as low as 38 cts/gal.

Majority of MX is blended into gasoline in the US, while in Asia, majority of MX is used for paraxylene (PX) production.

Strong buying was seen in China, which supported demand for MX in northeast Asia.

On the end-user front, Asia’s PX market performed relatively steady, reflected by its production spread to naphtha hovering above breakeven level.

With the optimistic outlook, northeast Asian buyers sought for additional MX supplies in order to maximise PX production even amid poor downstream demand.

Focus article by Keven Zhang

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