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Insight | Time: Jun 21 2019 1:55PM
Bleak PX outlook due to loosening supply/demand balance
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Asian PX market moved up in the last two trading days, with the price rising from $802/mt Jun 18 to $814/mt Jun 20, up 1.5%. In the meantime downstream PTA futures increased from 5,362yuan/mt to 5,586yuan/mt, and spot price from 5,675yuan/mt to 5,905yuan/mt over the same period, up 4.2% and 4.1% respectively. Compared with PTA, PX market was not so strong. In addition, the uptick in PX price lately is not comparable to fast increase in early June. It indicates that PX supply glut could swell on in the future.

On the supply front:
Several PX plants resumed production in Jun, after the completion of maintenance in the first and second quarters. In addition, there are still Sinopec Luoyang and CNPC Liaoyang expected to restart their plants in July. In terms of upcoming maintenance, only Fuhua Group and Thai Oil have confirmed plans to shut plants for maintenance, with combined PX capacity as 2.13 million mt/yr. Therefore, Asian PX supply is expected to increase.

Asian PX plant restarts and shutdowns
Company PX capacity (kt/yr) Status
CNPC Urumqi 1000 Shut in mid-Apr, restarted on Jun 17
Hengli Petrochemical 4500 No. 1 unit achieved on-spec PX on Mar 24, No. 2 unit started on May 10, operating stably since mid-Jun
Reliance 1800 Partly shut in H2 Apr, restarted in early Jun
FCFC 930 Shut in early Apr, restarted in mid-Jun
OMPL 915 Operating rate cut in May, recovered in mid-Jun
Hyundai & Cosmo Daesan 800 Shut from early May to early Jun
NSRP 700 Shut in early Jun due to glitch, restarted in mid-Jun
Aromatics Malaysia 550 Shut on Mar 20, restarted in H2 Apr
PTTG 540 Shut from early May to H2 Jun
FCFC 280 Shut from end-Apr to early Jun
CNPC Liaoyang 800 Shut from Jun 2 to Jul 21 for capacity expansion to 1 million mt/yr
Sinopec Luoyang 230 Shut in H2 Apr, to restart in H2 Jul
JXTG 3200 Operating rate cut by 20%
Fuhua Group 1600 Shut from Jun 20 to end-Jul
Thai Oil 530 To shut from end-Jun for 45 days

On the demand side:
PTA-PX spread has been remaining good in 2019, especially in the second quarter when it averaged at 1,400yuan/mt or above, a quite high level. Therefore, PTA producers are active this year, keeping operation at full swing, except when some plants were shut due to unexpected problem or scheduled maintenance. The demand for PX from PTA plants maintained healthy. However, with the temperature getting higher, uncertain factor for plant operation is increasing. Some PTA plants are shut for short periods recently, and Fuhua Group plans to shut 4.5 million PTA units for maintenance of 20 days starting from early Jul and Hengli’s 2.2 million mt/yr PTA units could also shut for maintenance but the date is undecided.

In the third quarter, new PX plants are expected to maintain stable operation. Meanwhile, Sinochem Hongrun’s and Hainan Refining’s PX plants could start as scheduled. Therefore, PX inventory could increase heavily, and thus PX market is expected to be weak in the longer run.

In terms of PX-naphtha spread, it narrowed to as low as $280/mt in mid-May, then recovered to $400/mt for a short period, but then reduced again to $330/mt currently. The downside room from PX cost is limited, but the spread could more impacted by supply-demand fundamentals.

Recently, as end-users are active in buying, polyester inventory is transferred, and thus plant operating rate is ramped up. In terms of PX, the impact from Hengli’s new plants is tapering off, and the market could be supported by downstream polyester though market sentiment could be affected by new plants. When the laycans roll over to Sep, the impact from new plants on PX price could be more obvious.
[RISK DISCLAIMER] All opinions, news, analysis, prices or other information contained on this report is provided by analyst of Zhejiang Huarui Information Consulting Co., Ltd (CCFGroup) as general market commentary and does not constitute investment advice. CCFGroup will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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