Asia MX market ends seven-week rally amid long supply

Author: Keven Zhang

2020/06/23

SINGAPORE (ICIS)--Asia isomer-grade mixed xylenes (MX) has ended a seven-week price rally in the week ended 19 June, as the prompt market weakened with increasing supply.

Supply has increased due to reduced operating rates at downstream paraxylene (PX) plants, who were selling MX cargoes to the market.

Spot isomer MX prices on 22 June were assessed at $436-446/tonne FOB (free on board) Korea and $454-464/tonne CFR (cost and freight) northeast Asia.

The high-end price reflects an August delivery cargo, which was traded at a $10/tonne contango over the price for July shipments.

Market participants expect the operation cutbacks to last for a couple of months, leaving MX in a prolonged oversupply.

The contango structure is thus likely to roll over to the subsequent month.

Producers' margins, represented by the spread between FOB Korea MX price and front month naphtha price, were assessed at a low of $42.5/tonne on 19 June. The typical breakeven spread for producers is $160-180/tonne.

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For producer, it makes more sense to buy MX off the spot market instead of maintaining the BTX (benzene-toluene-xylenes) extraction operation, with feedstock naphtha prices are at a three-month high.

Meanwhile, continuous catalytic reformers are reconfigured towards a higher gasoline yield.

In upcoming months, MX will see more supply length, as Zhongke Refining & Chemical’s 400,000 tonnes/year plant will start up in July, located in Zhanjiang China.

Demand from China has slowed with persistently high inventory and the softer gasoline sector.

Due to limited transactions, China’s refiners were unable to raise gasoline price to the same extent as the international crude oil prices.

Blending margins were squeezed, as gasoline product prices were stagnant, while the cost of gasoline components were rising in line with naphtha and crude oil benchmark prices.

Gasoline blenders thus reduced consumption of aromatics in blending, including toluene and MX.

On 22 June, China's domestic MX prices were at CNY3,680-3,700 ex-tank east China.

Focus article by Keven Zhang

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