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Insight | Time: Mar 20 2023 2:36PM  Editor:Louis
PX-naphtha spread breaks through $400/mt
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Crude oil nosedived last week, amid expectation of interest rate hike and the fallout of bank failure. During Mar 6-17, WTI and Brent crude futures plunged by 17% and 15% respectively. Meanwhile, the drop in PTA price was rather small compared to crude oil. May contract of PTA futures declined by 6.8% from the high point on Mar 8 to the low point on Mar 16, and it only lost 2.2% during Mar 8-17. PTA spot price shed by 4.7% during Mar 8-16 and lost 2.5% as of Mar 17. The spread of PTA spot to futures widened heavily from 65yuan/mt on Mar 8 to 145yuan/mt on Mar 17. PTA with its strength came under the spotlight.


However, PTA processing spread got squeezed over the same period. It widened to 450yuan/mt on Mar 8 and further to 467yuan/mt on Mar 10. But the processing spread based on May PTA futures and PX paper goods has narrowed to 290yuan/mt as of Mar 17, down by 38% from the high point, indicating negative profits from most plants.


PX seems to have kept a low profile, with price strengthening and profits widening.


During Mar 6-17, PX price advanced 1%, and its spread to naphtha widened by 39% to above $400/mt, hitting new high since Oct 10 2022.


The divergence in PTA and PX can be reflected by plant operating rates.


In mid and late Feb, the operating rates of polyester plants, as well as downstream DTY units and weavers recovered to the high points. Meanwhile, PTA plant operating rate fluctuated downward, leading to PTA processing spread widening since mid-Feb amid improvement in fundamentals. In the beginning of Mar, with better economics, PTA producers were motivated to raise plant operating rates and the average level hiked rapidly from 70% to 80%.


As for PX, the traditional turnaround season began in Mar, with several plants in and outside China starting maintenance. With further maintenance schedules, PX plant operating rate is expected to further move down.


Company Location Capacity (kt/yr) Turnaround
Sinopec Jinling Jiangsu 700 End-Mar to early May, O/R cut
CNOOC Huizhou Guangdong 950 Mar 15, 50 days
Sinopec Luoyang Henan 230 Delayed to mid-May
CNPC Liaoyang Liaoning 700 Early Apr, 1 and a half months
CNPC Urumqi Xinjiang 1000 Mid-Apr to late Jun
Weilian Chemical Shandong 2000 Apr-May, 2 months
Fuhaichuang Fujian 1600 Q2, 1 and a half months
ZPC Zhejiang 4000 Q2
GS South Korea 400 Mar 18 to late Apr
GS 3# South Korea 550 Mar 8 to early May
NSRP Vietnam 700 Shut in end-Feb and restarted in late Mar; t/a delayed from Mar to Aug
Hengyi Brunei Brunei 1500 Mar 12, 45 days
TPPI Indonesia 550 Feb 23 to end-Mar


Based on the turnaround scheduled, China and Asian PX plant operating rates could further drop and reach low points of 70% and 68% respectively in mid-Apr. Afterwards, it is expected to increase gradually. China PX inventory is expected to reduce in Apr and May, unless any massive PTA plant shutdowns happen.


Under this circumstance, and with some PTA producers entering to buy, PX price rises and thus PTA processing spread is squeezed.

[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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