Asian PX market sentiment weakens amid higher output expectations, subdued downstream

Asian paraxylene spot prices weakened in early trade Feb. 11 as expectations of increased PX production following a recent price rise and subdued downstream activity in China weighed on the sentiment.

At 1130 SGT, Platts pegged Asian paraxylene down $3/mt at $892.67/mt CFR Taiwan/China, reversing a bullish run in prices which had risen consistently since Feb. 4 when it was assessed at $858/mt, data from S&P Global Energy showed.

Furthermore, at the Asia close Feb. 10, the March/April intermonth spread crunched to minus $1/mt, the narrowest intermonth structure seen since Aug. 12, 2024 when the intermonth spread was at parity, the data also showed.

One of the reasons for the decline in PX prices from their recent highs is the expectation of increased PX production as spreads to feedstock MX improve, according to a Chinese trader.

At the Asia close Feb. 10, the spread between the PX CFR Taiwan/China and the Isomer-MX FOB Korea markers was assessed at $90.67/mt, vastly higher than the lowest spread seen this year of $70.17/mt on Jan. 7, data showed.

A spread of more than $100/mt is considered ideal for most MX-based PX producers.

Market sentiment for PX spot demand improved recently, reflecting rising spot prices and improved production margins, though the structure flipping into backwardation is not looking likely in the near term, a trader in Singapore said.

"I do not see backwardation [in intermonth structure] yet but [a spread] of flat [plus or minus a few dollars] is decent," the trader added.

A narrowing structure ideally shows improved buying interest with limited cargo availability for buyers, a second Singapore-based trader said.

However, with cargo declaration dates for March-arrival cargoes only a few days away on March 15, the recent structure changes may not really be a valid indicator, the second trader noted.

"It's always hard to gauge the structure when March declaration is only 2-3 days away but it [does] show [there] is indeed not much March-arrival spot cargo in the market," he said.

Meanwhile, a third Singapore-based trader stated that PX-MX spreads still need to improve for production to surge, though the paper markets have also weakened in line with the physical on the day.

"I'm in and out of paper [markets] all day, so I get a feel for momentum. [The] last few days [were] better bid [but] today the opposite," the third trader said.

Muted downstream activity

Chinese polyester plant activity was expected to improve post the Lunar New Year holidays, stirring up strong demand for upstream PX and PTA, market sources suggested.

However, the polyester production recovery has been subdued so far with not enough activity visible to digest growing PTA inventories, a trader in China said.

"[Market] may not be very optimistic about the resumption of polyester production," the Chinese trader said.

In the week to Feb. 7, Chinese polyester plant operations were around 82%, only marginally higher from the pre-holiday levels of around 79%, the same trader stated.

PTA prices are also struggling as inventories continue to pile up after the holidays, some Chinese brokers said.

In the week to Feb. 7, PTA inventories in China were around 3.37 million, compared to around 3.23 million before the Lunar New Year holidays, brokers said.

"The demand for this week's [downstream] goods is not so large, but there are too many [PTA] spot goods at the dock, and delivery is difficult," a second Chinese trader said, referring to PTA stockpiles.

But optimism has not waned a lot and there is still ample to look forward to in terms of better buying interest, the traders said.

Several turnarounds for PX and PTAplants over the next few months, production curbs by Asian PX producers and the upcoming peak summer demand season for polyester products will offer great support to spot prices, sources said.

Furthermore, aromatics demand for blending into gasoline ahead of the US summer driving season will pull product to the West despite expectations of softer demand compared to previous years, an Asian PX producer said.

"We will see some peak [of blending demand and] even though it won't be as high as the past, it will draw some molecules away [to the west]," the producer said.