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EPCA 2018: Sources say European paraxylene supply to be short, reliant on imports

Highlights

Indorama Artlant PTA plant main demand center

Middle East well placed to benefit

London — The European paraxylene market is likely to become structurally short of product as Indorama's recently restarted Artlant purified terephthalic acid plant in Sines, Portugal, theoretically could absorb all available European production and still require imports, according to market sources.

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"The Artlant plant will be short," a source said. Indorama will have to "import from the Middle East or the US because [available] production in Europe is not enough," the source added.

The source, like others, spokes with S&P Global Platts at the EPCA conference in Vienna.

The believed paraxylene equivalent capacity of the Artlant plant, where operations were restarted in July after several years dormant, is 450,000 mt/year, by far the largest demand for PX in Europe.

Already in September, Indorama has imported significant volumes of paraxylene from the Middle East as it sought to build up stock levels of PTA before going on a short maintenance period in October.

This comes at a time when "anyone that can produce paraxylene [in Europe] is already maxed out" because the margins are so attractive, a paraxylene producer said.

A trader added that the imports were secured both because Middle Eastern product was cheaper and because supply was tight in Europe.

A paraxylene producer summarized that "if the price is very high, it means you can't get product" and that Indorama had to look elsewhere for their volume.

MIDEAST PX TO BENEFIT FROM EUROPEAN DEMAND

The Middle East has moved into the spotlight in the European paraxylene market, where recent fundamental changes in supply and demand have seen it come out ahead due to its geographic location.

"Europe is short of paraxylene," a producer said at the EPCA conference in Vienna this week, with strong demand now coming from Indorama's newly restarted Artlant purified terephthalic acid plant in Sines, Portugal.

Already in September, Indorama has imported significant volumes of paraxylene from the Middle East as it sought to build up stock levels of PTA before going on a short maintenance period in October because it could not find the volumes in Europe at attractive enough prices.

The imports have come despite paraxylene production in Europe at a peak, according to a producer.

Logistical issues within Europe have also increased Southern Europe's exposure to the Middle Eastern market. Product from Northern Europe is not so easy to transport to the South, a Northern European based producer added.

"It is like two different regions (Northern and Southern Europe). The South needs to attract product," the source said, adding that freight is expensive and logistics difficult.

This means it could be "cheaper for Southern Europe to procure volumes from the Middle East than Northern Europe," the source said.

The trade route is well trodden, with shipments moving in the opposite direction as well. A shipment of PTA from the Artlant plant was transported to the Egyptian Indian Polyester Company, EIPET, a joint venture between Indorama and India's Dhunseri, which is based in Egypt earlier this year, a source close to Indorama said.

Apart from Europe, the Middle East will also see demand from Asia. Following tariffs on US origin paraxylene by China, Asian buyers may well look to other sources of paraxylene. The Middle East could come out on top due to more competitive pricing than Europe and faster freight times.

"[Europe] will have to compete with Asia, as the Middle East is geographically well positioned," a market source said.

The lure of Middle Eastern cargoes is strong in Asia, with European volumes taking a backseat.

European paraxylene prices have tended to trade at a netback to Asia, meaning that Asian buyers do not save considerably and increase their risks due to long voyage times at around 40 days. This increases the risk of delays, and therefore demurrage costs as well as price fluctuations while the product is en route.

Middle Eastern voyage times are less, at around 25 days and so risks are reduced.

--Benjamin Brooks, benjamin.brooks@spglobal.com