Asian paraxylene braces for softer H2 as surging stocks restrain China demand

After the challenging first five months of 2024, participants in the Asian paraxylene market are gearing for more pain in the second half, as top consumer China battles growing domestic inventories along with higher production, while global demand recovery remains nascent.

Asian PX prices averaged at $1,031.72/mt so far this year, recovering from a year-to-date low of $1,001/mt reached on May 14, according to Platts assessments by S&P Global Commodity Insights. However, prices remained below the January-May 2023 average of $1,045.29/mt.

Market participants in Asia were hopeful of a strong first-half on gasoline blending demand ahead of the US summer driving season.

However, the optimism was tempered by surging aromatics inventories and ample availability of spot cargoes. Although US gasoline buyers have been purchasing blendstocks since early 2024, plentiful supplies capped buying appetite.

And the latest energy outlook by the EIA further dampened hopes of any meaningful demand rival in H2.

US gasoline consumption is seen at 8.91 million b/d in 2024, down 0.34% on the year, according to EIA's short-term energy outlook forecasts. The estimate for Q3 consumption is at 9.14 million b/d, or 0.99% higher than in 2023, but 8.81 million b/d for Q4, down 1.34% from last year.

Given the current scenario, there is little hope that PX prices will hit new highs in the latter half of the year, a trader in Singapore said.

"I don't see any upside at the moment unless something changes due to production issues [in Asia], then maybe it helps the situation," the trader in Singapore said.

Producers have opted for turnarounds in April and May, which has helped prevent a supply glut, the trader added.

"I feel there's more pain to come [for PX prices], so we don't know if there's a next leg down," a second trader in Singapore said.

Margin squeeze

PX margins have trended lower so far this year, with the spread between CFR Taiwan/China PX and C+F Japan naphtha staying below the $350/mt mark, Commodity Insights data showed.

PX supplies in Q3 are likely to increase with refinery turnaround season ending in Q2. Furthermore, there are still some hopes for gasoline blending demand though it may not be as strong as 2022 and 2023, said Xiaodong Zhang, director of aromatics analytics at Commodity Insights.

According to Xiaodong, one major Chinese producer may undergo PX plant turnaround in Q3, which could impact supplies, though plans remained unconfirmed.

Downstream worries

Moreover, expectations of additional PTA capacities coming online in China also weighed on market sentiment, said producers.

"We are thinking [that the] PX, PTA and polyester chain does not look very good," a trader in Japan said.

PTA operation rates have also dropped sharply while PX operation rates remained on the higher side, sources said.

European PTA demand looks subdued for the year, as the end-consumer consumption for PET failed to pick up. Meanwhile, a flurry of Asian exports to Europe could further aggravate the situation.

The polyester downstream market showed little signs of improvement this year despite operation rates sharply rising to around 93%.

"If you look at polyester chain, sales are not good for whole of last and this week. [Also], PTA margins are low," a PTA producer in North Asia said, adding that the trend could continue in the latter half of the year as well.

China's domestic consumption trend looked marginally better, though polyester producers are fighting to clear large stockpiles.

High inventories going into the second half of the year could potentially trigger sales at sharp discounts and this could further hurt profitability, the PTA producer said.

"They [buyers] saw piles of polyester inventory [so] they want to get discounts [and] they prefer to wait and buy," the producer added.

Download PDF >

Explore all stories

Chemical Trends H2 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

Nylon chain demand to be driven by automotive sector in H2

Global Polyethylene, EVA markets to grapple with oversupply amid uncertain landscape in H2 2024

Methanol to see global supply expansion despite stable-to-low demand

Challenging conditions to continue to weigh on global ethylene markets in H2 2024

Freight markets look to stay firm in 2024 amid disruptions, longer voyages

Recycled polymers grapple with divergence in regional commoditization, inclusion mandates

Demand uncertainty to influence key benzene markets in H2 2024

Phenol, acetone demand to stay soft in H2 amid largely ample supply

Demand to remain stagnant for H2 2024 and beyond as global chemical rationalization takes shape