NE Asia OX prices may extend gains on improved downstream market

18 July 2017 04:55 Source:ICIS News

OX goes into plasticizers. Plastic tubes with stoppers at a construction site. Photographer Image BROKER/REX/Shutterstock

SINGAPORE (ICIS)--Northeast (NE) Asia ortho-xylene (OX) import prices continue to climb on the back of higher local Chinese prices and improvements in downstream phthalic anhydride (PA) market conditions, a trend likely to continue through September.

The yuan-denominated spot OX discussions in east China climbed by Chinese yuan (CNY) 200/tonnes from the previous week to CNY5,800-6,000/tonne ex-tank during the week ended 14 July, according to ICIS data.

A two-ship collision in east China on 9 July, between Tian Sheng 18 and Shuang Hai Long, had resulted in a fire and suspension of operations at a petrochemical jetty in Changzhou. Shuang Hai Long was delivering 2,580 tonnes of OX to an end-user.

“Domestic prices and trading volumes were surging as the return of the end-user to the spot market had emboldened sellers,” said a China-based trader.

The end-users were purchasing cargoes from the local China market citing shorter delivery timeframe and limited regional spot availability.

Regional supply will remain tight as key producers in South Korea and Japan are undergoing maintenance and will not have any spot cargoes until mid-August.

Other OX makers are focusing production on the more lucrative co-product paraxylene (PX) and have no additional cargoes after meeting contractual and captive requirements.

The hikes seen in the local market had pulled prices for import material.

“I am willing to look at higher [priced] imports so long as the cargo can arrive within August. The recent strength in the [Chinese] currency, together with increases in domestic prices, has made imports attractive,” said a China-based end-user.

Downstream PA domestic prices had firmed driven by higher demand from the derivative markets that comprise phthalate such as dioctyl terephthalate (DOP) and diisononyl phthalate (DINP).

Encouraged by the healthy margins, some PA makers were looking to buy additional raw material to maintain stable operations, leading to an improvement in trading liquidity.

“The drawdown in PA stock pile has pushed domestic prices higher. There are plans to increase operating rates if the buying spree continues into end-July. In preparation, we have purchased some cargoes from the [domestic] market,” said a second China-based PA maker.

Most sellers had no July cargoes for the spot market and were in no rush to start negotiations for August amid uncertainties in market outlook.

According to market sources, ExxonMobil was locked in contractual negotiations with traders for their OX supply from their recently acquired Jurong Aromatics’ Singapore-based plant.

“I haven’t received any offer for Singapore-origin material this week. I heard from the traders that they are still in discussions with Exxon and it has not been finalized yet,” said a northeast Asian end-user.

As suppliers expect OX supply to be crimped by lowered output due to recent gains in co-product paraxylene (PX) values, they were targeting higher prices.

Most OX producer would be diverting raw material isomer-grade xylene to PX production due to the traditional peak demand season in the third quarter.

For the same reason a key Indian supplier will be reducing its OX output, producing enough to meet contractual obligations.

“Reliance [Industries Limited] has told us that they will not have any spot cargoes from end-July onwards. Supply is tight going into August hence we believe the price uptrend will continue until at least August or September,” said a South Korea based trader.

Top image: Plastic tubes with stoppers at a construction site. Photographer Image BROKER/REX/Shutterstock

Focus article by Hazel Kumari

By Hazel Kumari