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Insight | Time: Jun 23 2022 2:43PM  Editor:Louis Zou
Aromatics prices fall back after the spike
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Since mid-May, global aromatics markets had been fluctuating more heavily. PX, benzene, toluene and MX spiked from mid-May, before pulling well back in H1 Jun.


Starting from end-Apr or early May, aromatics price began the continuous uptrend and then the rise accelerated in early Jun. However, late in H1 Jun, aromatics products snapped the uptrend and headed south with prices falling back to the level seen in early Jun.


In terms of product, MX, benzene and PX moved more similarly, climbing up steadily in May and then spiking in end-May and early Jun before pulling back. As for toluene, the price increase was smaller in May. It also surged in Jun but reached its high point later than other products. Then, the pullback in toluene price was slower.


In terms of market, FOB Korea and CFR China MX prices showed different trends. On Apr 26, FOB Korea MX was flat to CFR China price, unlike the situation before when CFR China price was higher than FOB Korea price. Then, FOB Korea price exceeded CFR China price and hovered above the latter with the spread hitting high point of $250/mt in early Jun. From end-Apr to the H1 Jun when the price reached the peak, FOB Korea MX advanced 44%, CFR China MX gained 21%, and China domestic yuan price rose 26%. Then, FOB Korea MX fell back by 17%, CFR China MX was down 11% and China domestic yuan price only dropped 5%.


As for toluene, the fluctuation range of FOB Korea, CFR China and domestic yuan prices were similar. As for benzene, FOB Korea and CFR China price fluctuated more sharply than China domestic yuan price.


I. Driving force to aromatics

1. Crude oil spikes

From the chart above, aromatics prices have basically been tracking the movements of crude oil since May. From end-Apr to early Jun, Brent crude futures advanced 20.8% and spot surged 35%. Aromatics prices hiked 30-40% over the same period. Then, aromatics declined faster than crude oil, reflecting some difference in the fundamentals.


Product Rise Drop (As of Jun 17) Beginning of rise Beginning of drop
Brent crude 20.8% -8.5% Apr 25 Jun 8 Futures
PX 32.7% -14.3% Apr 26 Jun 8 FOB Korea
Benzene 31.2% -11.0% Apr 25 Jun 8 FOB Korea
Toluene 30.8% -4.6% Apr 26 Jun 10 FOB Korea
MX 44.3% -17.3% Apr 26 Jun 8 FOB Korea


2. Export demand increases with Asia to US arbitrage open

Due to the geopolitical conflict, spike in crude oil, as well as peak demand in driving season, US gasoline price hiked notably. The most active contract of gasoline RBOB futures soared by 44.5% from low point of $2.9931/gal to $4.3260/gal from Apr 11 to Jun 6. With rising gasoline price, demand for toluene and MX were more attractive in gasoline blending, especially in summer when there鈥檚 large demand for high octane number oil products. As a result, US refineries used more feedstock to produce oil products or used more toluene and MX in gasoline blending, instead of producing PX or benzene. Therefore, it led to rising aromatics prices and also tight supply of PX and benzene in the US, with a deficit to be filled by materials from Asia. As US aromatics prices were driven up by spike in crude oil, the arbitrage from Asia to US was open.


The arbitrage spurred export demand in Asia. The supply and demand balance of aromatics in Asia was affected, with supply turning tight, resulting in rapid price rise in Asian market.


3. Aromatics prices fall back

Firstly, crude oil retreated notably in early Jun, and aromatics were dragged down by drop in the cost. Secondly, US gasoline price pulled back, as US attempted to cap the price rise due to high inflation and US Fed hiked interest rate. Thirdly, aromatics prices in the US had exceeded that of gasoline, therefore, the economics of using toluene and MX in gasoline blending were less attractive.


Lastly, the trading in Asian market currently centers on goods to be loaded in Aug and it would take time for the cargoes to arrive at US, while the driving season in the US typically comes to an end in Sep. Though the duration of US driving season and whether high gasoline price could sustain longer is not completely certain this year, the market sentiment in Asia to US arbitrage has subsided.


II. Economics and plant operations of aromatics products

1. Economics improve obviously

The rapid rise in aromatics price led directly to fast improvement of economics. PX-naphtha spread widened to as high as $685/mt in early Jun, benzene-naphtha spread hit record high of $634/mt, and toluene to naphtha spread reached high point of $460/mt in mid-Jun, based on CFR Japan naphtha. CFR China MX to CFR Japan naphtha price spread widened to $430/mt and FOB Korea MX to CFR Japan naphtha spread reached as high as $680/mt. PXN spread hit 4-year high, and the spread of other products to naphtha all refreshed record highs.


Besides from increasing demand and rising prices, weaker naphtha also contributed to the improvement of aromatics economics.


Crude oil had been consolidating since H1 Mar, and naphtha supply was impacted by geopolitical conflict. However, demand for naphtha was sluggish, as crackers reduced operating rates as olefins were under severe losses. In addition, cheaper LPG continued substituting naphtha. However, most refineries ramped up operating rates due to good economics of oil products, hence, naphtha production increased. Naphtha to Brent crude spread squeezed from $300/mt in early Mar sharply to approach -$110/mt in mid-Jun.


2. Plant operating rate increases

China plant O/R (%) May 6 May 20 May 27 Jun 2 Jun 10 Jun 17
PX 68.8 76.7 77.8 77.7 85.6 83.8
Benzene 81 82.5 85.8 87.4 87.8 86.7
Toluene 73 75 76 78 77 75
MX 67.98 75 79 80 80 79



Motivated by good profits, producers ramped up plant operating rates. As of H1 Jun, China domestic aromatics plant operating rate continued rising. PX operating rate ticked up from 68.8% on May 6 to 85.5% on Jun 10, and MX operating rate hiked from 67.98% to 80% over the same period, while the increase in benzene and toluene operating rate was smaller. Then, the operating rate reduced slightly in mid-Jun due to plant maintenance.


Unlike the situation in China, plants operating rates outside Chinese mainland hovered low. In China, profits of refined oil products were weak with slow consumption and high inventory. Refineries preferred to produce aromatics. Outside China, however, oil product profits were attractive, and refineries were less incentivized to increase aromatics production. In addition, some plant maintenance outside China also affected plant operating rates.


In a conclusion, attributed to rise in crude oil, weak naphtha, Asia to US arbitrage as well as increasing demand for oil products, aromatics prices hiked in tandem with economics improving. China plant operating rate rose but Asian plant operating rate remained to be lifted.

[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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