NE Asian OX seen firming up on post-Lunar New Year restocking

SINGAPORE (ICIS)–Northeast Asia ortho-xylene (OX) prices are expected to maintain an uptrend fuelled by re-stocking activities after the Lunar New Year holiday amid limited February availability, market sources said.

Demand for February and March shipments picked up as end-users returned to the spot market, seeking cargoes to pad inventory levels. Some Chinese traders were receiving enquiries for February lifting but had no cargoes available.

“Before the Lunar New Year holidays, some end-users had already started purchasing February arrival cargoes as they expect demand to pick up upon their return and didn’t want to be part of foray,” said a China-based trader.

Supply of locally produced material is expected to remain stable-to-low as a major OX producer was maintaining operating rates at 60-65% due to healthier margins in co-product paraxylene (PX) market.

Adding to the bull, China’s Sinopec hiked its ex-tank OX offers in eastern China by CNY200/tonne to CNY7,100/tonne. On an import parity basis, the offer was equivalent to $866/tonne ex-tank.

Market participants attributed the price increase to firm buying interest brought on by post-Lunar New Year restocking activities and stable-to-firm discussions for downstream phthalic anhydride (PA) material.

“Sinopec had increased their list price because of the improvements in the PA and domestic OX market. There is talk in the market that Sinopec would hike offers again in the coming weeks,” said a China-based end-user.

Some Chinese buyers were seeking to commit to H1 March arrival import cargoes as domestic prices were gaining ground on the back of limited offers for regional cargoes.

Discussions for locally-produced material rose by CNY400-500/tonne to CNY7,400-7,500/tonne ex-tank during the week ended 10 February. On an import parity basis, it was equivalent to $901-913/tonne ex-tank.

“With the recent surge in domestic prices seen, some end-users are looking towards the import market as prices are almost on par and they are allowed two to three months breathing space before having to make payment on purchases,” said a northeast Asian trader.

With maintenance shutdowns in northeast Asia kicking off from February and lasting into June, the potential lack of deep-sea supply during this period fuelled the price uptrend.

Previous production issues at a European OX unit had pushed prices higher, making the arbitrage unworkable.

A key supplier to the northeast Asian market was undergoing maintenances at its plant and had no cargoes available for the spot market.

Owing to the limited supply and firm demand, some traders raised their buying indications to secure March shipments.

Thereafter, a 3,000 tonnne Taiwanese cargo for H2 February loading was concluded at $890/tonne CFR (cost & freight) China on 8 February. As the cargo is exempted from a 2% import tariff, the deal was equivalent to $872/tonne CFR China.

On the other hand, some buyers preferred to take a wait-and-see stance as they expect feedstock consumption to lower on the back of two South Korean PA plants undergoing maintenances between March-June.

“I need to buy March cargoes but I am not ready to commit to such high prices. As my plant still has contractual cargoes to rely on, I will be waiting for the hype to die down before entering the spot market, especially as there will be lesser competition because of maintenances,” said a northeast Asia based end-user.

Several end-users based in China and South Korea had covered their production requirements up to end-April with spot and contractual OX volumes, and hence had limited space available for additional material.

“We had purchased enough cargoes to last until end-April ahead of the Lunar New year holidays. Even if prices are cheap, there is not enough space in our tanks to store more cargoes. Besides, our plant would be undergoing a turnaround in April which also means we have no urgency to buy additional cargoes,” said a second northeast Asian end-user.

Others retreated to the sidelines as they expect prices to decline in the near-term as a Japanese producer, encouraged by the healthy profits and strong demand, had increased OX output.

Subsequently, the producer was heard to be offering a total of 6,000 tonnes for February loading via tender.

“JX Nippon has increased production of OX following the footsteps of the South Korean producers. Usually, they only have 2,000 tonnes for the spot market a month but for February alone, they have been offering 2,000 tonnes a week through tender,” said a third northeast Asian end-user.

Looking ahead, most players agreed that OX prices would tack higher but sentiment remains cautious about the strength in the downstream sectors despite the current firm demand.

Top image: Photographer: Amer Ghazzal/REX/Shutterstock

Focus article by Hazel Kumari