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Insight | Time: Dec 23 2021 10:53AM
Pressure on PX reduces with demand recovering
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PX profits have been squeezed rapidly since late Nov, with PX-naphtha spread narrowing from $163/mt to below $120/mt in mid-Dec, hitting record low. This round of squeeze in PX-naphtha spread was closely related to the sharp drop in PTA plant operating rate in China. PX was dragged down by weaker demand.


However, the demand is expected to rebound.


Since late Nov, adding to the low margins, some unexpected plant issues occurred and the pandemic re-surged in Zhejiang Province, leading to sharp decline in PTA plant operating rate which fell from the high point of 84% to 63% in mid-Dec. Afterwards, with supply and demand improving, PTA margin recovered some losses, with its spread to PX rebounding from 400yuan/mt to the current level of 600yuan/mt. With acetic acid cost included, PX margin has rebounded from 180yuan/mt in mid-Nov to the current level of 390yuan/mt.


With PTA margin improving, pandemic situation alleviating, and maintenance completing, some PTA plants are getting restarted.


Company PTA capacity (kt/yr) Status
Fuhua 4500 O/R cut to 80% on Nov 24, up 90%
Billion 2500 Shut on Dec 1, restarted on Dec 19
Yisheng Dalian 6000 Shut unexpectedly on Dec 17, restarted
Yisheng New Materials 3600 O/R cut to 30% on Dec 7, up to 90%
INEOS 1100 To shut in mid-Dec for 2 weeks
OPSC 750 Shut on Dec 2 for maintenance, to restart in end-Dec
Shenghong 2500 Shut unexpectedly in end-Nov, to H1 Jan


Therefore, China PTA operating rate is expected to rebound to 82% in early Jan, and may further increase to 84% after Shenghong restarts its plant. Meanwhile, no PTA producer has announced maintenance plan in Jan yet.


On supply front, Sinopec HRCC (Hainan Refining) plans to shut its 1 million mt/yr PX plant in end-Dec for maintenance till H1 May 2022, and shut its 660kt/yr PX plant in H2 Feb for 2-month maintenance. Meanwhile, Sinopec Fujian is poised to restart its PX plant in mid-Jan and expand the capacity by 150kt/yr to 1 million mt/yr. Sinochem Quanzhou is slated to restart its 800kt/yr plant in late Jan. Zhejiang Petroleum and Chemical is expected to complete maintenance on its 2 million mt/yr line in end-Dec. Zhongjin Petrochemical may have maintenance schedule, but the date is undecided. In addition, Sinopec Yangtze could start maintenance in end-Feb, Aromatics Malaysia plans to shut its 550kt/yr PX plant in Jan-Feb 2022 for maintenance, Oman Aromatics鈥 plant is scheduled to start maintenance in end-Dec 2021.


In a conclusion, with PTA operating rate rising, the impact from Shenghong鈥檚 PTA plant shutdown has winded down, and the pressure on PX has relieved. As PTA margin is in negative territory, PX-naphtha spread may recover some losses. There could still be pressure from PX plants鈥 raising operating rates and restarts, and demand from PTA could be affected by polyester and end-use plant operating rate cuts prior to the spring festival starting from end-Jan.

[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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