Asian OX supply to decline, demand dependent on downstream recovery

SINGAPORE (ICIS)–Supply of orthoxylene (OX) within Asia is expected to decline in the near term, as production rates are curtailed by weak margins.

OX is largely co-produced with paraxylene (PX).

PX production margins are squeezed amid firm feedstock naphtha and isomer-grade mixed xylenes (MX) prices, against a backdrop of weak market fundamentals.

Naphtha prices had recently been supported by improving demand in usage for fuel as a petrochemical feedstock, blending purposes with gasoline, and better downstream margins in olefins.

As a result, PX/OX production run rates had been curbed, as regional producers operate their PX/OX units at lower rates to mitigate losses.

South Korea’s Lotte Chemical recently shut its No 2 PX/OX unit. Its No 1 PX/OX unit is still in operation.

Taiwan’s Formosa Chemicals & Fibre Corp (FCFC) maintains the operating rate at its No 3 PX/OX unit at around 50%. The unit’s OX nameplate capacity is 250,000 tonnes/year.

In India, Reliance Industries Limited (RIL) had cut run rates at its production facility in July, and may continue running at lower rates in August. The company operates a 500,000 tonne/year OX unit in Jamnagar.

Following an increase of €15/tonne for July for the European OX contract reference price at €560/tonne FD (free delivered) NWE (northwest Europe), arbitrage cargoes into Asia are expected to stay limited.

According to ICIS data, OX prices in Asia stood at $535-545/tonne CFR (cost & freight) northeast Asia on 10 July.

However, without a full recovery in the downstream phthalic anhydride (PA) markets, spot buying interest for OX cargoes might stay flat, especially with outlook on downstream demand being grim.

In addition, downstream production margins are under downward pressure, as seen on the charts below, as end-users faced difficulty in passing on the additional costs to their customers.

Downstream Spread – OX and PA southeast Asia

Downstream Spread – OX NE Asia and PA China

Focus article by Samuel Wong

(Image: OX’s downstream PA goes into automaking; Photo by Imaginechina/REX/Shutterstock)