US PX demand poised to increase with MEG restarts

Author: Antoinette Smith

2020/10/23

HOUSTON (ICIS)--US paraxylene (PX) demand is poised to increase, as plants for monoethylene glycol (MEG) - which along with PX derivative terephthalic acid (PTA) is used in polyethylene terephthalate (PET) production - return from hurricane-related outages and planned maintenance.

Demand for US PX has been muted, due to lower PET production rates as a result of MEG shortages.

MEG supply is expected to rebalance in November, as idled plants resume production.

MEG RETURNING ONLINE
Sasol and Lotte have restarted their plants in Lake Charles, Louisiana, after being shut down for two hurricanes since late August.

Two more US MEG plants are scheduled to return from maintenance by the end of October.

Up to two-thirds of US MEG production was idled in September and most of October, following hurricanes Laura and Delta, and planned maintenance at other MEG plants.

Separate force majeure declarations remain in place for at least one-third of US MEG capacity as well as 25% of Canadian MEG capacity.

Before the MEG shortage, PET plants were running hard to meet increased demand as a result of the coronavirus pandemic and ensuing changes in consumer behaviour.

PACKAGING OUTLOOK
Packaging has remained one of the least affected sectors during the coronavirus-related economic downturn, amid increased e-commerce transportation, sales of personal care products and sharp increases in grocery packaging.

Food packaging has also been sustained, with a pickup in home delivery and take-away orders. Nielsen estimates that 58% of consumers globally ordered ready-made food for eating at home during lockdowns.

"We expect recoveries to continue, with food and beverages driving consumer goods output," said Jincy Varghese, ICIS demand analyst, and Rhian O'Connor, ICIS senior analyst.

Global food production should be 5.3% higher in 2021 than 2019, according to Oxford Economics.

"Consumers continue to prioritise hygiene and use single-use polymers, at least for the short term, as sales of cleaning and sanitizing products continue to boom," said Varghese and O'Connor.

Sustainability trends could stop this positive progression in the medium term as brands and retailers continue to sign up for single-use plastic reduction pledges, Varghese and O'Connor said.

In the US, the economic impact of the coronavirus has been less than originally feared, as lockdowns have been relatively short-lived.

Food, beverage and tobacco production is forecast to be down by 0.7% for 2020, much less than other sectors.

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Liquid packaging, including PET, has surged due to the sale of sanitizers and hand washes.

As far as sustainability initiatives are concerned, many areas that were introducing single-use plastic bans have now deferred them, said Varghese and O'Connor.

However, growth could be slowed by weaker fiscal aid and election uncertainty.

SUPPLY OUTLOOK
While downstream production is set to rebound in the coming weeks, US PX production is likely to remain low on unfavourable margins.

In addition, as China has made vast PX capacity additions and become less reliant on imports, that supply has begun making its way to the US.

About 80,000 tonnes of PX were headed to the US from the Middle East, India and France in late September and into October, according to shipping fixtures.

Mixed xylenes (MX) supply is lengthening after hurricane-related outages and planned maintenance, which should ease price pressure on the feedstock.

But with weak overall demand for MX, keeping it in the gasoline stream is the most favourable choice economically.

PX is predominantly used as a feedstock to produce PTA. Other outlets include dimethyl terephthalate (DMT), di-paraxylene, herbicides and solvents. Both PTA and DMT are used to make PET.

Around 98% of PX is used to produce polyester via PTA or DMT. DMT is also used to manufacture polybutylene terephthalate (PBT) resin.

Major producers of US PX are BP, ExxonMobil, Flint Hills Resources and Indorama.

Focus article by Antoinette Smith

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