Long supply, weak downstream sectors weigh on Asia PX market

11 October 2016 07:18 Source:ICIS News

Textile factory in China

SINGAPORE (ICIS)--Asia’s spot paraxylene (PX) prices are likely to remain under downward pressure from ample regional supply amid continued weakness in downstream markets, industry sources said on Tuesday.

Prices were struggling to climb past $800/tonne CFR (cost and freight) Taiwan and/or China despite the strength in the upstream crude oil market.

On 10 October, regional PX prices inched up $2/tonne from the previous session to $798-804/tonne CFR Taiwan and/or China, even as Brent crude crossed the $52/bbl mark, according to ICIS data.

For its major downstream purified terephthalic acid (PTA) sector, no major upswing in fourth-quarter demand is expected from the polyester industries. Spot demand has been thin as key buyers in the polyethylene terephthalate (PET) markets were holding off purchases due to weak export demand, market sources said.

Meanwhile, the naphtha-PX spread continued to be squeezed, narrowing to $360-365/tonne in recent weeks from previous highs of $440-460/tonne, as PX prices failed to track the rebound in crude oil futures.

The spread is not expected to widen by much for the rest of the fourth quarter as PX prices are being weighed down by long supply in the regional market.

A major Chinese producer is looking to offload PX cargoes as its affiliated downstream PTA units in Dalian are due for turnaround this month.

Yisheng Petrochemical’s 2.5m tonne/year No 1 PTA line will be down for two weeks from 9 October, while its 3.75m tonne/year No 2 PTA line will also undergo maintenance when the No 1 line restarts.

Also in Dalian, Hengli Petrochemical is planning a three-week turnaround at its No 2 PTA line this month and is mulling a November turnaround at its No 3 PTA line at the same site. The company’s No 1 PTA line had a three-week turnaround and was restarted in the second half of September. Each of the three units has a 2.2m tonne/year capacity.

Asia’s PX inventory remained high, with end-users not likely to hold on to excess volumes in the near term, market sources said.

Cargoes from Singapore, India, the Middle East and the US for November and December shipments remained on offer in Asia. Excess monthly supply is estimated at 20,000 tonnes, but traders said that the combined volumes for October and November shipments could be as high as 100,000 tonnes, augmented by Europe cargoes, market sources said.

More deep-sea PX cargoes may flow into Asia in the fourth quarter amid open arbitrage windows with the US and European markets, they said.

Meanwhile, the supply overhang will be exacerbated by the expected start-up of Reliance Industries’ new 2.25m tonne/year PX unit in Jamnagar, India, either in end-October or early November, market sources said.

India is expected to be self-sufficient in PX when the Jamnagar plant starts up, and will turn into a net exporter of the material early next year, they said.

Reliance’s PX volumes are expected to feed its own downstream PTA plants in India and in southeast Asia, with any excess volumes expected to hit the export market in the second quarter of next year, market sources said.

Focus article by Paul Lim

PX CFR CMP, Taiwan 11 October 2016

Picture: Rolls of yarn at a textile factory in China's Anhui province. Textiles are the main downstream of paraxylene (PX) and purified terephthtalic acid (PTA). (Source: Imaginechina/REX/Shutterstock)

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By Paul Lim