Asian OX supply to stay tight; weak downstream demand a headwind

SINGAPORE (ICIS)–Asia’s orthoxylene (OX) supply is expected to stay tight amid low inventories and overall lower run rates being maintained within the region, while spot trade remains limited on soft downstream demand in the phthalic anhydride (PA) and plasticizer markets.

• Limited availability of spot OX cargoes
• Firm feedstock costs provide a floor
• Squeezed downstream margins curb spot buying

Firm offers for spot OX cargoes were few, with regional producers’ inventories staying low on the back of low run rates being maintained at their paraxylene (PX)/OX facilities, coupled with upcoming and ongoing turnarounds.

Feedstock isomer-grade mixed xylenes (MX) prices were firm, supporting OX prices, coupled with a tightly supplied market, regional suppliers were mostly withholding offers for spot cargoes.

In the Chinese domestic markets, prices stood at around yuan (CNY) 9,000/tonne EXWH (ex-warehouse) for the week ended 25 March, equivalent to an import parity of around $1,240/tonne CFR (cost & freight) China Main Ports.

Several regional suppliers noted that better sales netback could also be achieved by healthier market fundamentals seen in the west, with prices higher as compared with those in Asia.

In Europe, deals for spot OX materials due to arrive in late April were done at between $1,330-1,380/tonne FOB (free on board) Rotterdam.

Despite a tightly supplied OX market in Asia, end-users are expected to stay at the sidelines amid mounting costs pressure faced, with persistent slow demand seen in the downstream markets.

Furthermore, OX-based PA producers were facing competition from the naphthalene-based PA markets as well.

Downstream Spread – OX and PA southeast Asia

As a result of uneconomical production margins for OX-based PA producers, several of them were planning scheduled maintenance going forward, limiting the requirement for spot OX cargoes.

Aekyung Petrochemical in South Korea and Nanya Petrochemical in Taiwan have scheduled maintenance in April.

Market uncertainty remains with the ongoing conflict between Ukraine and Russia, and with the recent surge in COVID-19 cases in China.

Market participants will stay cautious, with buying pattern to be kept on a need-to basis.

Focus article by Samuel Wong

($1 = CNY6.37)

Thumbnail photo: At Rizhao Port in Shandong, China on 26 January 2022. (Source: Xinhua/Shutterstock)