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Insight | Time:Sep 14 2017 3:37PM
PX supply and demand may turn better later
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PX price was prompted to improve by cost last week, but PX-naphtha spread was still compressed, which showed no substantial change in PX fundamentals. Inventory of PX has not decreased but better expectations to cost and demand exist. PX supply and demand may improve in Q4, especially after Oct.

PX-naphtha spread is compressed
PX-naphtha spread keeps at $340/mt or lower currently. Suppliers with high cost have been affected rather than refining-chemical plants.

PX-naphtha spread is compressed while naphtha-Brent oil spread is widening.

With prices of propane and butane at $480/mt and $500/mt in Sep, naphtha has limited room to move down. By comparison of previous LPG and naphtha, naphtha price appears higher than that of LPG generally, except in heating peak or special time.

The accidental hurricane changes supply and demand of oil products as well as that of crude oil. Price spread of Brent and WTI oil improves to high level, relatively favorable to long position.

PX supply may be digested later

For expectation to PX supply and demand, supply expectation lends support to forward PX price. PTA-PX spread improves to 800yuan/mt or above in Jul-Sep, leading some PTA units to manage to restart in advance.

PTA units to start up in Q4 includes Tongkun’s 2,200kt/yr, Reignwood’s 1.400kt/yr, Xianglu Dragon’s 4.500kt/yr (including a line of 1,500kt/yr) and Taiwan Oriental Petrochemical’s 1,500kt/yr. Nearly 6,600kt/yr PTA capacity produces demand for PX capacity around 360kt/yr per month. Therefore, pressure from PX supply length in Q4 will be alleviated obviously.

As a result, some plants prefer to buy PX and sell PTA. In addition, it is not advisable to buy PTA Jan’18 contract yet sell PTA May’18 contract with such supply and demand situation of PTA later.

On the whole, PX may go weak in long run with production peak in 2019, but may turn better in short term as many PTA units are anticipated to start up later.
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