Asian PX breaches one-month high on demand for April, May cargoes; concerns linger

Asian paraxylene reached a one-month high Feb. 27 on improved buying interest for April and May loading cargoes, though weak spot trading and thin gasoline blending demand will likely keep a lid on prices going ahead, market participants said.

Platts assessed Asian paraxylene CFR Taiwan/China up $13/mt on the day at $1,044.67/mt Feb. 27, the highest since Jan. 24 when it was assessed at $1,042.67/mt, data from S&P Global Commodity Insights showed.

The gains came as trades for April and May loading cargoes commenced this month especially after the Lunar New Year festivities, with market participants expecting a sharp uptick in buying interest and spot prices.

However, an overhang of March cargoes, slow downstream recovery in China post the holidays and limited boost from US gasoline blending demand will keep prices in check, sources said.

"So for PX right now, March and April are oversupplied [and] from [South] Korea, we only hear couple of cargoes going to the USA," a trader in Singapore said.

Spot prices for Asian PX have only marginally improved in February compared to January, according to the data.

In February so far, PX CFR Taiwan/China averaged $1,027.79/mt compared to $1,025.33/mt for January, the data showed.

Contrary to expectations, prices have seen only a modest uptick despite hopes for the upcoming US summer driving season shaping Asian blending demand, sources said.

"People cautious, I reckon. Let's wait and see," a producer in Southeast Asia said on gasoline blending demand.

The trader in Singapore said that most of the PX cargoes going to the US are only covering term requirements for now.

"No new PX demand [so] I don't feel that there is an uptick for gasoline [blending] demand yet," the trader said.

Concerns over China's appetite

China's sluggish economic recovery has further clouded the outlook for Asian aromatics, sources reckoned.

"[Chinese] economy is [facing] difficulties," a PTA producer in North Asia said. "If China cannot recover soon, polyester demand [will be below] expectations."

Downstream activity in China was expected to improve sharply after the holidays but so far it has been slow to get off the blocks, the producer added.

"Downstream in China slowed due to long holidays but once labor comes back to factories things will slowly come back to normal," the producer said.

Polyester demand will also likely be muted with only PET demand looking bright for now, the producer said.

This could further hurt Chinese PTA producers, who continue to grapple with blunted margins and bloated inventories, sources said.

"I heard PTA inventory [in China] is [around] 2.8 million mt [which makes the situation] still tough," the North Asia producer said.