China isomer grade xylene under pressure as supply outstrips demand

Focus article by Hazel Kumari

SINGAPORE (ICIS)–Demand for regional isomer-grade xylene from China remains weak due to the supply overhang in the northeast Asian region exerting pressure on its prices, a downtrend likely to continue in weeks ahead.

Several traders were hesitant to take a buy-sell position, expressing concerns that isomer-grade xylene spot prices had yet to bottom out considering the length in supply and limited demand, especially from China.

Domestic prices in China had declined week on week as spot availability for February and March had lengthened considerably due to the high operating rates at their toluene disproportionate (TDP) units. The overall operating rates in China was heard at 80-100%. 

The mid-point in domestic prices had softened by CNY88/tonne week on week to CNY5,675/tonne ex-tank in east China. In south China, domestic discussions dropped from CNY6,100/tonne ex-tank on 14 February to CNY5,900/tonne ex-tank by 21 February.

“With domestic cargoes being priced at such attractive rates, it makes no sense for them [Chinese end-users] to import,” said a northeast Asian trader.

Inventories of isomer-grade xylene along eastern China surged due to softening domestic demand.

Supply had jumped by 16.7% to 82,500 tonnes in the week ended 17 February as some Chinese producers had increased operating rates at their TDP units to meet the firm benzene demand.

“Most of the cargoes in the tanks belong to domestic producers and not from imports,” added the trader.

The supply of isomer-grade xylene in northeast Asian for March would be boosted by the higher operating rates at toluene disproportionate (TDP) units based in Japan, South Korea, Taiwan and China.

Previous firm demand and surging benzene prices in the northeast Asian and American regions had boosted producers’ sentiment, prompting them to raise TDP operating rates to meet export requirements.

Most market participants expect the elevated output to extend until end-March.

“There is too many cargoes available for March with some traders having problems finding homes for them. At the moment, every end-user is depending on contractual volumes and not in the least interested in buying spot,” said a northeast Asian based producer.

As such, isomer-grade xylene intermonth spread between March and April widened from a $5/tonne to an $8/tonne contango. The spread was assessed wider on 21 February as compared to 20 Febraury.

According to market participants, isomer-grade xylene supply within the Chinese market would increase in the coming weeks as China’s Ningbo Zhongjin Petrochemical has restored aromatics production to normal on 13 February after repairs.

Some domestic traders expect a surplus of volume available to the domestic market once the company is in “full swing”.

“[Ningbo] Zhongjin has fixed their problems and ramped output at their reformer from 50% to almost full. As they feed their PX unit with heavy naphtha and isomer-grade xylene, all surplus isomer-grade xylene cargoes will find themselves in the spot market,” said a China-based trader.

As supply outstrips demand, most market participants expects Chinese discussions to continue its downtrend, further limiting buying appetite for import cargoes.