SINGAPORE (ICIS)--The Asian paraxylene (PX) market is expected to see more supply in the second half of 2017 as producers in south Asia and the Middle East are expected to continue offering spot volumes from July onwards.
Traders and end-users expect large quantities of open-origin cargoes coming from the Middle East and India from July onwards, largely because of new capacities.
An estimated 100,000 tonnes of spare PX volumes could be in the market for Q3, including shipments from the US and Europe.
ONGC Mangalore Petrochemical Ltd (OMPL) offered an initial 120,000-tonne PX tender for the third quarter of 2017, and later followed up with a 90,000-tonne tender for the same time period when not all the volumes offered in the first tender were taken.
It later offered a 30,000-tonne spot tender for end-June loading in an effort to dispose of additional volumes.
Market sources said this indicated a slight delay in the start up of JBF Industry’s new downstream 1.1m tonne/year purified terephthalic acid (PTA) plant in India.
Middle eastern producer Saudi Arabia Basic Industries Corp (SABIC) is also expected to continue floating spot tenders in the second half of 2017, offering about 10,000-15,000 tonnes of PX each time.
It had cancelled an end-July loading 10,000 tonne spot tender due to low bids submitted by traders.
The open-origin cargoes are expected to make landfall in either southeast Asia or China, where downstream purified terephthalic acid (PTA) operating rates will not be at high rates due to a number of scheduled turnarounds.
End-users are not likely to face any tight supply or actively seek spot cargoes.
There are also more volumes expected to come from Sikka, India, as Reliance Industries confirms the full operations of its new 2.25m tonne/year PX plant in Jamnagar and starts to increase export volumes from June onwards.
It had started shipments from end-April, delivering PX cargoes to end-users in China and southeast Asia.
There were also ample offers from sellers selling open-origin volumes from the US, the Middle East and India, with regular arbitrage volumes moving from the US and Europe to Asia in deep-sea vessels.
PX spot demand was largely flat amid lengthy supply, with not many end-users in the market to source for spot volumes, traders said.
However, this does not mean that the naphtha-PX spread would dip further below the current $360-380/tonne level, due to steady purchases of spot cargoes on a fixed-price basis by traders.
Prices are expected to continue tracking upstream crude oil, naphtha and PTA futures values in the second half of the year.
While a series of fire incidents and plant turnarounds had caused the naphtha-PX spread to increase in the first half of the year, the spread dipped in the second quarter as supply continued to outstrip spot demand.
Discussions levels for cargoes offered on formula or floating bases were continually fetching discounts of $5-10/tonne.
However, spot prices continued to track upstream crude and naphtha values, as well as PTA futures prices, maintaining at least a $380/tonne spread over feedstock naphtha in most parts of first six months of 2017.
The ongoing downstream purified terephthalic acid (PTA) turnarounds was the key reason for the weak spot demand.
PX inventory levels in east China tanks continued to be described as high by market sources.
Many PTA plants conducted turnarounds in the second quarter, due to poor PX-PTA spreads in the domestic yuan (CNY) markets.
PTA majors such as Yisheng Petrochemical and Hanbang Petrochemical scheduled PTA turnarounds in east China, while a major producer in south China also shut a production unit in the second quarter of this year.
Other smaller units in Ningbo also had niggling production problems and stopped their lines intermittently.
Sellers said there were spare volumes in the market and that producers were looking to off load spot cargoes through traders.
A two-week turnaround at Reliance Industries’ older 1.8m tonne/year PX unit in Jamnagar in second half June on the back of feedstock issues is also expected to ease supply pressure amid the successful start up of its third 750,000 tonne/year PX train from early-June.
Steady operating rates at downstream polyester segments further down the polyester chain is also expected to continue sustaining PTA demand, allowing PTA producers to continue consuming PX volumes.
Focus article by Paul Lim