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Insight | Time:Aug 18 2017 6:54PM
Where will PX go with current high inventory?
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China’s PX imports recovered to 1,187kt and exports were 5kt in Jul while domestic PX output declined to 775kt, reaching the lowest since Sep 2016. PX output in Aug is expected to be low amid low operating rate of PTA and soft demand.

In addition, several large PX units saw some accidents. For example, operating rate of a 1,000kt/yr PX unit slashed to around 60% from 90% due to restricted use of fresh water, which may last for one month. Another 1,400kt/yr PX unit has not restarted after the scheduled turnaround and the restart timeframe remained uncertain.

However, in spite of all above-mentioned, domestic PX inventory reached nearly 2.60 million tons with low PTA output and PX demand less than expected.

Ratio of Jul inventory and demand reached 1.4 and may inch down in Aug.

Where will PX go later? For supply, PX-naphtha spread remains at around $350-360/mt despite high inventory, which can generally ensure normal operation of all PX units in the world.

As Asian PX turnaround season has passed, only some China’s PX units, including Zhongjin Petrochemical and Sinopec Hainan, have turnaround plans in Q4, which is in favor of PX import market.

For demand, possible start of PTA units (old or new) are expected to contribute to demand for PX in Q4, so PX-naphtha spread in Q4 may not be too bad.

According to previous PX capacity expansion boom, PX profits will be compressed largely, like that in 2010 and 2014. PX capacity is predicted to reach the peak in 2019 so that PX-naphtha spread may not perform well.

Situation in 2018 may appear complicated. In 2014, new PX units were put into operation in Jun-Sep intensively with capacity of over 4,000kt/yr and nearly 2,000kt/yr PX units were put into operation during end-2013 to Q1 2014. In total, around 7,000kt/yr PX units were put into operation during end-2013 to 2014. In 2019, new PX capacity may reach nearly 10 million tons/yr.

However, PX-naphtha spread hit the lowest in Mar-May, 2014. That is to say, the market may be affected by the capacity expansion one quarter in advance. Thus the impact on PX-naphtha spread may appear in 2018.

PX market may witness some changes in 2018. Market participants will deal with the expansion boom through diverse measures like postponing major PX shipment contracts for half a month and selling much earlier. PX market may expect large fluctuation 2018.
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