Asia isomer-grade xylene hits nine-month high on PX surge

Focus story by Hazel Kumari

SINGAPORE (ICIS)–Spot discussions for second-half August isomer-grade xylene parcels in Asia rose to their highest level in more than nine months, tracking the uptrend in downstream paraxylene (PX) market, industry sources said on Monday.

But end-users were sceptical that the current price uptrend will be sustainable as PX supply will increase in the next quarter, as new regional plants are due to start commercial operations.

Existing PX plants might cut operating rates or shut their plants to cope with the surplus material. This would reduce consumption of feedstock isomer-grade xylene material.

On 18 July, isomer-grade xylene spot prices were assessed at $1,246-1,253/tonne FOB (free on board) Korea, up by an average of $68/tonne or 5.8% from the previous week, according to ICIS data.

PX prices stood at $1,450-1,510/tonne CFR (cost and freight) CMP (China Main Port), rising $55/tonne or 3.9% from the previous week, the data showed.

Buying indications for isomer-grade xylene for second-half August loading gained momentum last week on short-covering activities by traders.

Bids started at $1,225/tonne FOB Korea, rising to $1,245/tonne FOB Korea. These buying indications met offers at $1,260-1,270/tonne FOB Korea.

Sellers, on the other hand, were unwilling to lower their offers below $1,260/tonne FOB Korea, citing tight supply and firm downstream market conditions.

Most market participants held bullish view that the uptrend seen in the isomer-grade sector would continue in the near term, as there were improvements in the overall polyester chain.

Early in the week, the average sales-to-output ratio in the polyester sectors in China were hovering at below 80%. By mid-week, however, the ratio jumped above 100%, reflecting improvement in demand for polyester goods.

Supply for second-August has shrank as a key producer, South Korea’s SK Global Chemical (SKGC), has diverted most of its available isomer-grade xylene output into its new PX plant in Ulsan, according to a market source.

“The demand for isomer-grade xylene would start increasing as SKGC has reduced contractual volumes to some PX producers. [As a result,] these people would have to come into the spot market to look for cargoes to continue running their plants,” a trader said.

In the first quarter of the year, isomer-grade xylene spot prices were put under pressure as two end-users – South Korean firms Hyundai Cosmo Petrochemicals (HCP) and Lotte Chemicals – implemented production cutbacks and have been selling their surplus feedstock into the spot trading arena.

Lotte Chemicals has started selling its excess feedstock – US-origin isomer-grade xylene – in the American spot market in the last two months since this is more cost effective, to reduce their inventory pressure, according to a company source.

Moving forward, most market participants agree that spot prices for isomer-grade xylene would continue on its roller-coaster ride, closely tracking volatility and price trends in the PX market.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections