Asian BTX margins soar to 2.5-year high on market-wide rally; producers may raise runs

Singapore — The spread between the average prices of benzene, toluene and isomer-grade mixed xylene or BTX to naphtha surged to a 2.5-year high of $226.30/mt Feb. 26 amid a rally in petrochemicals on the back of rising crude oil prices and production disruptions, S&P Global Platts data showed.

The spread was the highest since reaching $229/mt on Aug. 16, 2018, and is prompting producers to consider raising run rates for reformers, or tweak the balance between BTX and gasoline production, market sources said.

Producers with the ability to tweak their production away from gasoline towards increased BTX production would be likely do so, at least until the end of March, when upcoming aromatics startups in China and US refineries returning to full production were expected to move the aromatics market back to surplus and weaken margins, according to S&P Global Platts Analytics petrochemical analyst Eshwar Yennigalla.

One Northeast Asian producer said the company was currently considering its options as aromatics prices were looking strong. However, producers also pointed to the gasoline market, where trade opportunities appeared equally attractive. "But the overseas gasoline price also increases," a source said.

Asian gasoline margins have also soared, with the FOB Singapore 92 RON gasoline crack against front month ICE Brent crude futures averaging $4.28/b in February, up from $3.71/b in January and $2.30/b in December, Platts data showed. Sustained low refinery runs due to delayed refinery restarts, recovering domestic demand and the upcoming shift toward summer-grade gasoline will continue to provide a springboard for Asian gasoline's upward momentum, industry sources said.

Meanwhile, benzene FOB Korea prices neared the $900/mt mark Feb. 26, and were assessed at $897.67/mt. The last time the FOB Korea benchmark was above $900/mt was in February 2018, Platts data showed.

The price rise has been unstoppable since mid-February, after the Lunar New Year holidays and after Texas' unforeseen freeze.

March-loading cargoes were heard to be limited, as demand remains strong on both a CFR China and CFR Southeast Asia basis, fueling continued price gains in the market.

In production economics, the benzene-naphtha spread stood at $297.795/mt Feb. 26, almost hitting $300/mt. The last time the spread crossed $300/mt was in December 2017.

Both toluene and isomer-MX have uses as petrochemical feedstocks, in the production of benzene and paraxylene, as well as being potential blendstocks for gasoline.

MX has tracked paraxylene mostly, but toluene basked in both ways, tracking the upward momentum in both benzene and PX.

Toluene output lower

Collectively among Northeast Asian refiners, production of toluene was lower amid turnaround season. With downstream demand in the benzene and paraxylene chains still strong, expectations on demand for toluene materials for April remained positive, sources said.

Isomer-MX was assessed at $804/mt FOB Korea Feb. 26, the highest level since Nov. 13. 2018, when it reached $817/mt FOB Korea. Toluene physical touched a more than two-year high at $780/mt FOB Korea Feb. 25.

BTX margins have increased rapidly in recent weeks after having fallen as low as $3/mt on Oct. 9, 2020.

Sentiment in the Asian naphtha market was firm on tight supply in the West of Suez, however with the rollover to the H2 April delivery cycle, the front month swap backwardation was pegged lower by brokers in mid-morning trade Feb. 26. Brokers pegged the front month April/May Mean of Platts Japan naphtha swap spread at $7.50/mt, down from $9.50/mt at the Asian market close Feb. 26. The backwardation structure flattened as supply tightness was expected to ease further out as US Gulf Coast refineries are in the process of restarting after the polar vortex.

Lower crude prices led the physical CFR Japan naphtha benchmark down $2.50/mt from the Feb. 26 Asian close to $597.375/mt in early trade March 1, Platts data showed.

The key spread between the CFR Taiwan/China PX marker and CFR Japan naphtha physical has moved into the typical breakeven range of $280-$300/mt since Feb. 25 and could prompt splitters to raise run rates due to the improved margins. This PX-naphtha spread reached a 10-month high of $286.205/mt Feb. 25 before edging down to $281.995/mt on Feb. 26 as PX prices saw a downward correction after a sharp uptrend earlier in February, Platts data showed.