PARAXYLENE-PX (UP STREAM) MARKET DURING APRIL & MAY 2011

NA PX price was a roll over of March @ 85.5 cents/lb.  In contrast to this Asian settlement price of $1690 /lb fell to $1600 levels during April in wake of weak downstream demand particularly the fibre sector.  However, the NA producers were of the opinion that the relatively tight availability of PX in the market allowed a settlement of roll over, even though conditions in Asian markets had changed at a time when NA settlement was taking place.  However, the general notion of tightness of supply in the North American market is fading away with Exxon Mobil production issues at Beaumont site coming to an end.  It is believed that turnarounds at Flint Hills Resources (500 ktpa) are also ongoing.  Further an import window has also opened up, as the parity of NA PX with Asia has been ajar for some time, thus improving the likelihood of the availability of PX via imports.  Further the logic that has supported this settlement has been increase of 10-11 cents/lb of MX due to higher crude oil prices.  So what we have seen is higher feedstock prices starting to finally impact downstream Paraxylene (PX) price, which, given the narrow range of crude oil movement when crude was below $100/barrel, had remained detached from Mixed Xylenes (MX).  However, analysts are aware that the parity with Asia has generally widened too much, and this would inevitably bring down the price of PX in the NA market.  In the European market the point of view has been less clear, as downstream demand has remained a little hard to read.  Some customers had pushed back deliveries and there was lack of interest of spot material, which has lead to a marginally less than a rollover price settlement for April.  At the same time, hope of the startup of PKN Orlen PX and PTA start up at Plock in Poland, and the resumption of Gadiv is helping to ease market supply sentiments.  Another force majeure at Lotte, Wilton had been expected to last at least throughout April.  So with availability of PX at PKN Orlen in Poland, the PTA output at Plock facility will certainly ease an impending supply concerns.  So even in Europe the settlement will be at a differential with Asia + freight, which should take it to $1650 levels.  Currently complete ease in supply of PX is still not being seen. 

In the East Asian economies the PX spread over Naptha was already unsustainable and  the Japanese Earthquake further helped PX spike to over $1800; however, this was short lived and prices had fallen considerably to $1600 levels in April.  Amongst the salient factors that have resulted in price reduction on PX has been primarily the lack of demand of the downstream polyester fiber sector in China, and with plenty of new production coming up, 1000 ktpa Urumuchi’s PX startup, S-Oils 900 ktpa startup in Korea and the 45 days maintenance turnaround of CNOOC in China will boost supply in that region.  PTA producers in China, in wake of reduced downstream demand from PSF sector have brought forward their turnarounds, which has in turn again reduced demand for PX.    The Middle Eastern political unrest may have pushed up the crude oil prices to > $110/barrel levels, however, the downward correction of PX has already taken place as price of crude oil have fallen lower than $100 / barrel.  PX in the recent past has remained detached in price fluctuations of crude oil, but with price of barrel reaching $113 levels, the element of Mixed Xylenes (MX) had started playing a part in Paraxylene costing.  Since now, again, the price of crude oil have retreated the foundation which MX was providing to PX has been taken away, which would mean that PX would come under a price pressure.  In Japan, many damaged plants are back in production, however, JX’s Sendai, Kashmina refineries & Cosmo Oil’s Chiba refinery still remained closed.  This has been more than compensated with new plant outputs making their way.  The main concern for Japanese producers remains sale/production output ration in China of Polyester Staple Fiber (PSF), which seems to have slowed down amidst the restrictive economic measures taken by the Chinese government.  Clearly, now even for the Japanese producers, it is not about output, but downstream demand.  

MIXED XYLENE MARKET (UPSTREAM)

Mixed Xylenes (MX) have remained strong in the North American market and Far East.  In North America MX price went up from 4.00 $/gal to 4.27 $/gal from March to April.  This has limited trade activities with Asia, as such prices have limited profitability for exports from North American.  Increase of crude oil, reaching ~ 113 WTI, has remained the main cost driver of MX.  Further in the European markets, there has been a demand for this feedstock by Paraxylene  producers, but again, these prices have remained unattractive.  Asian markets tightened as an aftermath of the earthquake and tsunami increasing by $200/ton, however, Chinese inventories were high at that point, and with a new production of 1.2 mtpa coming up, this shortage was easily filled up.  So there was a sudden shock, which seems to have quietened down.  However, with recovery in Japan occurring at a moderate pace, there has been a slight tightening of supply, and this coupled with recent dip in crude oil prices, has taken some steam out of this feedstock, but it still has a potential to impact downstream sector if there is a reversal in crude oil in the short run.