Asian paraxylene prices to find little support through supply curbs

Spot prices for Asian paraxylene are expected to face more trouble in the weeks ahead as poor downstream polyester demand blunts any potential support to prices from production curbs in the region, sources told Platts, part of S&P Global Commodity Insights.

Sentiment for an improvement in demand cues and physical spot prices for PX continues to dwindle, traders said.

Platts, part of S&P Global Commodity Insights, last assessed PX down $2.34/mt at $835.33/mt CFR Taiwan/China on March 17.

Turnarounds by PX and PTA producers in China as well as plans to extend some production stoppages in South Korea have failed to inject any enthusiasm in the market so far, a trader in Singapore said.

"I think the South Koreans and Japanese are just not going to produce [as] every ton they produce its losses," the trader said. "If you let them breakeven, they 'll produce [but] its [still] all losses."

South Korea's SK Geo Centric will likely extend the turnaround at the 400,000 mt/year PX line at its Ulsan plant amid weak production margins. The turnaround period might get extended to around 90 days though the plant was earlier expected to remain shut for around 45 days, Platts reported earlier.

Other producers in South Korea may also be tempted to consider a similar move, some sources said.

Outside of Asian downstream demand, the poor outlook for gasoline blending in the US has also harmed prices, sources said.

As the summer driving season in the US approaches, the pull of aromatics from Asia is expected to weaken even further in the weeks ahead, the trader in Singapore added.

"MX is difficult to sell so just do PX, fulfil term contracts [and] get out," the trader said.

The summer driving season in the US has failed to deliver, and a South Korean trader said that he did not think that there would be much pick up in demand even in the next few months. The outlook for MX remains weak.

For the China market, there is demand with relatively higher prices, but in China, with many Shandong refineries under maintenance turnaround, there is more of a supply shortage rather than a burst of demand, the source added.

The poor demand outlook for blending is evident in the lower exports of South Korean PX to the US, South Korean customs data showed. South Korea sent 29,106 mt of PX to the US in February, down almost 35% from January.

"Hear volumes for March loading [PX to the US] will be [even] lower on weaker arbitrage economics and softer demand," a shipbroker in Singapore said.

MX -- a key feedstock to produce PX -- has benefitted over the past few years from healthy blending demand for gasoline. However, this year, demand for MX also looks sluggish leaving more feedstock available in Asia.

"Selling MX is a pain [in the current scenario]," the same trader in Singapore highlighted.

Polyester's problems

A recent improvement in PET demand helped boost PTA prices briefly but with downstream polyester markets in China still in a lull, the pressure on upstream PX and PTA will continue, a Chinese trader said.

"Probably for [the] downstream [sector], polyester demand is not good [and] the inventory of polyester [products] is really high," he said referring to inventories for products such as partially oriented yarn, fully drawn yarn and drawn textured yarn.

In the week to March 14, stocks for partially oriented yarn were around 25.5 days, fully drawn yarn around 31.5 days and drawn textured yarn around 33 days, the trader added. Inventory levels nearing 40 days of supply are considered concerning for producers.

Despite the large inventories, polyester plant operation rates in China have shown little inclination to slow down, a broker in China said. In the week to March 14, polyester plants in China were operating at around 91.5%, up from 88.9% in the previous week.

Further upstream, the recent gains in oil prices have also done little to stimulate prices for the PX chain, a second trader in China said.

"No idea yet [on why higher crude prices have no impact], trying to figure out. I guess it is about demand [as] demand is still weak," the second trader said.