Gasoline demand, tighter supplies seen supporting 2024 Asia PX prices

Mostly steady gasoline blending demand in the US ahead of the summer driving season and tighter paraxylene supplies in Asia are expected to support Asian PX prices in 2024, trade sources said.

A much-delayed recovery in China's economy could also influence PX demand and prices into the new year.

Like 2022 and 2023, gasoline blending demand was likely to be a key factor driving demand for PX and other aromatics from Asia next year, trade sources said. Amid low gasoline inventories and limited refining capacity in the US, Asia could once again step up as a major supplier of aromatics for blending into the gasoline pool in 2024.

However, some caution has tempered optimism for gasoline blending demand in 2024. The US Energy Information Administration forecast that US gasoline consumption may decline 1% in 2024, resulting in the lowest per capita gasoline consumption in two decades. An increase in remote working, improvements in fuel efficiency of the US vehicle fleet and high gasoline prices and inflation have reduced per capita gasoline demand.

But purified terephthalic acid production growth in China in 2024 could impact PX supplies, with very few PX capacities being added in the region.

New PTA capacity in China will include Yisheng's Hainan plant, which commenced operations in November, FCFC Ningbo Line 2, Sinopec's Yizheng and Hanbang's new line, according to Xiaodong Zhang, Director Aromatics, S&P Global Commodity Insights. But for PX, the only new capacity expected is Yulong Island's plant, with its 2024 startup still in question, Zhang said.

Current expectations of tighter supplies and mostly steady gasoline blending demand showed that the PX-naphtha spread could widen, providing producers ample incentive to increase runs.

Despite a recent drop in PX prices, the PX-naphtha spread has not narrowed sharply, staying well above the $300/mt mark.

"Now is the off-season demand, PX-N has also risen to around $370/mt, and the price is really high," a trader in China said, referring to a healthy PX-naphtha spread despite a lack of blending support for PX.

In the fourth quarter so far, the spread between CFR Taiwan/China PX and C+F Japan naphtha averaged $374.47/mt as of Nov. 21, even as PX prices fell on the back of a seasonal drop in gasoline blending demand, S&P Global data showed.

In Europe, demand was expected to be weak moving into the first half of 2024, with lackluster downstream appetite from the PTA and polyethylene terephthalate industries, trade sources said. Market participants do not expect a change in PET fundaments in Europe, with demand possibly returning in the second half of 2024.

China economic recovery

Slow demand from PTA producers in China could weigh on PX prices in 2024, traders said. PTA producers in the country continue to grapple with weak margins as Chinese economic recovery struggles to gain pace and domestic consumption remains lackluster.

"Competition [among PTA producers] is still serious and demand is not recovering a lot," a PTA producer in North Asia said.

PTA producers in the country had little hopes for a swift economic recovery and were likely to find it difficult to raise operating rates.

Some PTA producers could consider shutting down or reducing operating rates as margins struggle, while more capacities were expected to come online in 2024.

"Every year we expect next year [to be] better, but it doesn't happen, [so] everyone will play conservative," the PTA producer said.

A polyester producer in China said PTA margins could stay low for most of 2024 and probably hover in the Yuan 250-300 range.

"Maybe [margins of] Yuan 250 [or lower] is losing money [and], I don't think standalone producers can survive with these margins," the producer said, indicating the breakeven level around Yuan 250.

S&P Global's Zhang said another tough year awaited PTA producers in China. For integrated producers, it may not be too easy to lower operating rates, but if margins don't improve, they may have little option but to scale back.

India demand

India's PTA demand could be one bright spot next year, traders said.

Consumption trends in the country remain robust with demand cues in 2023 showing a significant improvement over the previous year, especially in the run up to the Diwali festival.

A major worry for PTA producers in the country was PX supplies, which could impact domestic production.

"Indian demand should be fine but the [supply of] PX is the major concern. We are trying to secure our PX," a PTA producer in India said.

The implementation of Bureau of Indian Standards norms has cut off Chinese PTA supplies and buyers in India have aimed at diversifying their PTA procurement options.

Indian buyers have bought PTA from South Korea, Taiwan and Thailand in the second half of 2023, with a similar trend expected in 2024, traders said.

For PTA sellers outside China, the Indian market has been a lucrative destination given its potentially strong buying interest and limited options for Indian buyers.

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Chemical Trends H1 2024
This feature is part of our bi-annual report analyzing the biggest themes and trends that will dominate chemicals markets in the year ahead. Explore more features below, or to read articles looking at the year ahead for a wider range of chemical markets, visit Platts Connect

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