NE Asian OX uptrend expected to last into November

SINGAPORE (ICIS)–Spot prices of orthoxylene (OX) in the northeast (NE) Asian region is expected to continue rising in the coming weeks on the back of firm downstream demand and limited supply, market sources said on Monday.

OX prices were assessed at an average of $755/tonne CFR (cost & freight) NE Asia for the week ended 28 October, the highest level since 10 June, according to data compiled by ICIS.

The uptrend in the OX market started upon the Chinese players return from their Golden Week holidays as most end-users returned to the spot market seeking feedstock material amid bullish domestic market and firm demand for downstream phthalic anhydride (PA) material.

Improvements in the PA and derivative dioctyl phthalate (DOP) markets had aided consumption of raw material OX material.

Some PA makers were encouraged to increase their operating rates from 40-50% to 50-60% to meet increasing demand but most were unable to raise output above 60% due to the tight feedstock supply.

In China, robust buying appetite for November loading raw materials amid limited domestic supply had bolstered sentiment amongst market players.

Discussions had jumped from CNY6,000-6,100/tonne ex-tank on 7 October to CNY6,500-6,600/tonne ex-tank by 28 October.

The hike in local OX prices was attributed to lowered availability of cargoes in the domestic market following lowered stockpiles and a delayed restart.

“Ex-tank prices are so expensive now, it is actually cheaper to import cargoes despite the depreciation in the yuan,” said a northeast Asian end-user.

China’s OX oil major Sinopec Yangzhi Petrochemical were diverting more feedstock to the production of PX which would lower OX output, tightening supplies for November.

Sinopec Jinling Petrochemical had delayed the restart at its aromatics unit in Nanjing from 9 October to 24 October after local authorities cleared safety inspections and approved a restart.

The postponement was attributed to a fire caused by a leak at an associated reforming unit. Currently, the plant is keeping run rates low and commercial output has not been achieved, according to sources.

Subsequently, China’s OX majors Sinopec Yangzi Petrochemical and Sinopec Zhenhai Refining & Chemical (ZRCC) increased its list prices by CNY450/tonne over a fortnight to CNY6,450/tonne ex-tank, adding to the bullishness.

Traders were receiving more enquiries for November shipments as downstream PA makers were sitting on lowered feedstock inventories. However, most had no cargoes having sold their stock in previous weeks.

Other Chinese PA makers are intending to stockpile ahead of contractual discussions, year end and Lunar New Year holidays.

Despite raising their buying indications, sellers were expressing difficulties sourcing additional cargoes to meet the rise in demand.

“Supply is very tight right now. We are unable to get any cargoes from the spot market as the arbitrage from the US and Europe has been shut for most of this year,” said a northeast Asian trader.

Regional supply was also curtailed by a spate of maintenances in Japan and South Korea.

Other producers had no cargoes available for the spot market after fulfilling contractual obligations.

A key Taiwanese producer hiked his offers by $20/tonne to $850-860/tonne CFR China in view of the tight regional supply.

The offers are equivalent to $833-843/tonne CFR China after normalizing for a 2% tariff exemption. Buyers expressed disinterest as these cargoes were too expensive and would result in negative margins.

Looking ahead, most players expect the firm demand and discussions for spot OX cargoes to remain firm into November as end-users would be looking to stockpile OX material as the current firm demand from downstream markets is expected to extend into end-November, before companies close their trading books.

(Top image: Photographer Jeff Tzu-chao Lin / imageBROKER/REX/Shutterstock)
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Focus article by Hazel Kumari