China aromatics prices snap uptrend as gasoline blenders cover needs, supply increase looms

China's domestic aromatics prices have fallen in the week to Oct. 29, reversing the gains of the week before, as gasoline blenders have largely covered requirements and a major domestic producer has received a fresh crude oil import quota, heralding an impending increase in supply, traders said.

Toluene ex-tank prices snapped a five-day uptrend Oct. 26 after gasoline blenders were said to have covered most requirements. Downward pressure was intensified by private refining complex Zhejiang Petroleum & Chemical receiving a quota to import 12 million mt of feedstock crude oil, enabling it to increase output across its product slate.

Domestic toluene was assessed at Yuan 6,650/mt Oct. 28, down Yuan 305/mt from a record high of Yuan 6,955/mt Oct. 25, and equating to $938.98/mt on an import-parity basis, S&P Global Platts data showed.

"Hearing [gasoline] blenders were buying up the market and now [they are] mostly covered," a China-based broker said. "Seems the wave is over," a Chinese trader said.

"MX dropped, mainly because [domestic] gasoline and diesel [prices] dropped since ZPC got another 12 million mt crude quota -- they raise operating rates, gasoline output will be more than before," another Chinese trader said.

"Diesel dropped Yuan 1,000/mt, gasoline dropped Yuan 500/mt and MX... MTBE dropped Yuan 500/mt each within 3-4 days," the trader added.

ZPC receiving its long-awaited crude import quota of 12 million mt Oct. 25 set off a chain reaction of falling domestic prices as the massive refining and petrochemical complex was expected to ramp up production and sales, sources said.

Outlook weak

Isomer-mixed xylene retreated to $849.50/mt CFR China Oct. 28 after touching an all-time high of $891/mt Oct. 18, Platts data showed, with gasoline blending demand expected to be dented by the ZPC news.

The November MX ex-tank price fell Yuan 370/mt from Oct 25 to around Yuan 6,495/mt Oct. 28, equating to $870.20/mt on an import parity basis.

MX prices were expected to fall further in coming sessions, a Chinese trader said. "ZPC got another 12 million crude quota, they raise operating rates, so gasoline output will be more than before," the trader added.

Isomer-MX and toluene are both used to make paraxylene as well as for gasoline blending in the China market.

Key aromatics product PX tumbled $54.67/mt day on day to $913/mt CFR Taiwan/China Oct. 28, easing further from a month-to-date high of $967.67/mt Oct. 15, while the FOB Korea marker fell to $893/mt from $947.67/mt a day earlier amid the concerns of looming oversupply.

Bearish sentiment stemming from the ZPC news outweighed the pricing support from feedstock naphtha, with the PX-naphtha spread trending further down to $131.75/mt Oct. 28, a 10-month low.

The near-term pricing outlook for PX was being impacted by the expectation of higher run rates at ZPC, while PX stocks have also been piling up at some producers in Northeast Asia due to vessel congestion in China, market sources said.