Asian PX spot prices, production margins recover amid supply cuts, easing Chinese downstream stocks

Asian paraxylene spot prices and production margins are experiencing a long-awaited resurgence due to supply cuts in the region and easing downstream inventories in China, with additional spikes anticipated in the coming weeks, sources told S&P Global Commodity Insights.

Market sentiment has vastly improved over the past week as Asian producers have curbed production, traders said.

Platts assessed Asian paraxylene up $12.33/mt day on day at $888.33/mt CFR Taiwan/China Jan. 15, the highest since Oct. 11, 2024 when prices were assessed at $897.67/mt.

Similarly, the PX-naphtha spread also hit a multimonth high on the same day when it was assessed at $205.46/mt, the highest since Oct. 9, 2024 when it was assessed at $207.46/mt, Commodity Insights data showed.

"[Margins are] still not enough so hope to see at least a $250/mt PX-naphtha [spread] for the prompt month," a trader in Singapore said.

Though rising margins are a relief to producers, there is more scope for the spread to rise further, the trader said citing recent run cuts outside of China. A spread of around $330/mt-$350/mt is considered breakeven for most PX producers.

"Depends on China [PX producers since] outside China most plants already did what they could [to limit production]," the same trader in Singapore said.

PX prices had risen over the past week as some South Korean producers were heard to have cut operations as expectations of a lull in demand due to the upcoming Lunar New Year holidays in China were hurting sentiment, Commodity Insights earlier reported.

Meanwhile, rising crude prices have propelled naphtha prices, with the benchmark C+F Japan naphtha cargo, reaching a three-month high at $682.88/mt Jan. 15 Asian close, Commodity Insights data showed. It was last higher at $695.88/mt on Oct. 14 Asian close.

Despite higher naphtha prices, the fundamentals of the market continue to be poor resulting in some steam cracker operators to consider increasing their LPG feed and even reducing their operating rates, which further dampened demand.

The physical spread between CFR North Asia propane and CFR Japan naphtha stood at minus $41.88/mt at the Jan. 15 Asian close, suggesting that propane is a cheaper feedstock as compared to naphtha.

On the supply front, market participants continue to monitor for the additional US-imposed sanctions on Russian tankers—where the Biden administration announced curbs on more than 180 shadow tankers, bringing the total US blacklist to more than 470 ships.

"There is not much impact seen so far," a naphtha trader said though end-users may worry if the flat prices go over the $800-$900 level, the source added.

Another trader shared similar views, emphasizing that the situation is still evolving, sanctions have been enacted in the past, yet oil continues to flow.

Sources cited that the recent improvement in aromatics margins could be likely due to steady gasoline blending and a drop in production.

Downstream buzz

With the onset of the Lunar New Year holiday season, market activity in China, particularly in downstream polyester production, slows, resulting in decreased operation rates, traders said.

However, this year could look slightly different with some polyester plants unlikely to lower their production rates by a lot, a trader in China said.

"I have heard the news that [some] polyester factories have sold all their stocks and are ready to continue production without reducing operations during the Spring Festival," the trader said.

Market sources said that some of the larger polyester players such as Hengyi, Xin Feng Meng and Tongkun could be eyeing this strategy over the holiday period.

Sources at Tongkun and Hengyi did not comment while sources at Xin Feng Meng could not confirm the development yet.

The inventories of products such as fully drawn yarn or FDY, partially oriented yarn or POY, and drawn textured yarn or DTY have dipped a fair bit, another Chinese trader said.

"The inventories are quite low so the polyester filament factories may not reduce production too much," the second trader said.

The trader said that for POY, inventories currently sit at around less than 10 days, compared to around 15 days at the same time last year. For DTY, current inventory levels are at around 20 days, compared to around 25 days this time last year, and for FDY inventories are around 15 days in 2025, similar to the levels seen last year.

One worrying factor remains the potential tariffs that the incoming Trump administration could slap onto future Chinese exports, a third Chinese trader said.

For polyester products, the ratio of production consumed by the domestic market and the export market is almost equal, the trader said.

The trader further added that any imposition of punitive tariffs could significantly alter that ratio and adversely affect producers, given the ongoing sluggishness in the domestic demand.

Until then, sentiment remains fairly buoyant with post-holiday downstream operations set to pick up at a faster pace this year compared to previous year, sources said.

"I guess the market will be good after the holidays because downstream operating rates will go up," the third trader said.