Asian PX-naphtha spread shrinks to historic low on weak PX demand, supported naphtha

The spread between paraxylene and naphtha shrank to an record low of $117.445/mt at the Asian close Dec. 14, S&P Global Platts data dating back to April 2005 showed, as PX prices weakened further on a bearish demand outlook while naphtha was supported by rising propane prices.

The CFR Taiwan/China PX price was assessed down $12/mt day on day at $832.33/mt at the Asian close Dec. 14, outpacing $1.25/mt dip in the benchmark C+F Japan naphtha cargo assessment over the same period to $714.875/mt, Platts data showed.

The spread, which has been narrowing since Dec. 6, had already touched a 14-month low at $128.205/mt Dec. 13 -- a level deemed extremely slim by producers that have been grappling with margin losses for months. The breakeven spread for PX producers using naphtha as feedstock is typically in the range of $220-$250/mt, according to market sources.

The slim spread has increased talk of further PX productions cuts, with some producers across Asia already operating at a loss, while others may extend turnarounds until there is a recovery in margins, market sources said.

Despite the ongoing maintenance at multiple PX plants, the market remains under pressure from a supply glut resulting from weakening demand and the startup of new capacity.

Scheduled maintenance in the downstream purified terephthalic acid sector amid a seasonal lull has also reduced the PX demand outlook for second half December and January, which was being compounded by a recent pandemic resurgence in east China adding to demand concerns due to the impact on logistics in the region. China's PTA plant operating rates stood at around 70% in the week to Dec. 11 due to logistics bottlenecks, and some market sources fear PX demand will weaken further if the issues persist.

There might still be some demand in January and February, but market participants were currently on the sidelines amid volatility in crude oil futures and the unclear general outlook, one source said.

Naphtha stable

In contrast, the Asian naphtha market was stable as demand for paraffinic naphtha and relatively more expensive propane prices supported the complex.

Strength in the market was seen as the CFR Japan naphtha physical crack spread against front-month ICE Brent crude futures rose $5.85/mt day on day to $153.125/mt at the Asian close Dec. 14, and was up $15.475/mt week on week, Platts data showed.

Rising propane prices have firmed demand for naphtha as the more economical feedstock. The physical spread between CFR North Asia propane and CFR Japan naphtha widened $42/mt week on week to $35.625/mt at the Dec. 14 Asian close, Platts data showed.

Naphtha blendstock demand was expected to firm further as the reforming spread -- or difference between Singapore 92 RON gasoline and the Singapore naphtha derivative -- widened 60 cents/b week on week to $8.65/b at the Asian close Dec. 14, Platts data showed. The wide spread makes it economically viable for gasoline producers to use naphtha as a blendstock.