US spot paraxylene prices hit record low as gap between contract and spot widens

US spot paraxylene prices extended declines Monday, falling $35 to close at $525/mt FOB USG, the lowest level since S&P Global Platts began assessing the product in October 2006.

Prices began to moving lower in Q2 2019 on the back of vast new capacity builds in Asia and have continued to slide into 2020 amid global length and poor producer economics in the US. Prices fell dramatically in March of this year, impacted by the coronavirus outbreak and exacerbated by recent lower energy prices associated with the Russian-Saudi Arabian crude oil price war.

The continued declines in US paraxylene pricing have further widened the gap between spot and contract pricing, S&P Global Platts data shows. The March US paraxylene contract was reportedly settled at 35 cents/lb ($771/mt), down 6 cents ($132/mt) from February. At current levels, the March contract price holds a premium of $246/mt to spot pricing. The differential has curtailed production in the US Gulf as paraxylene makers have little incentive to produce incremental tons, sources said.

Prior to recent sharp declines, paraxylene economics were poor due to stronger mixed xylene prices and sources noted that one US paraxylene producer opted to take a unit down and sell mixed xylenes and buy spot paraxylene. Production from toluene conversion units was also curtailed as margins remained in the red for the majority of Q1, Platts data shows. US paraxylene prices were expected to face continued pressure amid a spate of imports loading out of South Asia and the Middle East in February and March.

Economics could improve somewhat with Citgo restarting aromatics production at its Lake Charles, Louisiana, facility, a move that could bring 35,000 mt/mo or more of mixed xylenes online. Sources have noted that lower xylene prices could improve the spread and encourage production from Parex and crystallization units, but demand remained a question mark in the near term. Further out, new PTA capacity builds in China in late 2020 and 2021 should help improve paraxylene demand in the region and abroad.