Oversupply in Asia and weak demand in Europe - PX market prospects in 2021

According to news on November 30, market analysts said that in 2021, the global paraxylene (PX) market will continue to focus on Asia, especially China. Although Asia's new downstream capacity will temporarily absorb the excess PX supply, a large number of new PX capacity will be released, and the prospects for global economic recovery under the COVID-19 epidemic are still uncertain, so the market oversupply situation will continue. As the economic recovery from the pandemic is the main factor affecting PX spot prices and market fundamentals, analysts are not optimistic about the PX market in 2021.

　Asia, Zhejiang Petrochemical Phase II will increase 5 million tons/year

　　 Analysts predict that the oversupply situation in the Asian PX market will continue into the first half of 2021. Nevertheless, market participants expect that the fundamentals of the PX market in 2021 (especially in the first quarter) may be improved due to the tightening of supply and demand caused by the new capacity of purified terephthalic acid (PTA).

　　 As the production profit rate has been lower than the break-even level for a long time, the operating rate of PX devices in Asia has declined, and supply and demand are rebalancing. However, despite the weak economic environment, due to gasoline blending needs and refineries need to ensure internal hydrogen supply for upstream product desulfurization, the decline in PX plant operating rate is limited. A South Asian market source said that the reduction in market supply may not be enough to effectively alleviate the current oversupply in the market. A trader said that only a sharp change in the gasoline market or a decline in polyolefin profit margins, prompting refineries to reduce operating rates as a whole, will lead to a greater decline in PX production.

The new PX demand brought about by China’s new PTA capacity will also help absorb the excess supply of PX in the first quarter of 2021, including Fujian Baihong Petrochemical’s 2.5 million tons/year new PTA capacity and Jiangsu Shenghong Petrochemical’s 2.4 million tons/year The newly-built PTA production capacity in 2010 and Ningbo Yisheng Petrochemical's 3 million tons/year newly-built PTA production capacity. According to calculations by S&P Global Platts, these new PTA capacities require approximately 5.25 million tons/year of PX demand.

However, all eyes on the PX market are focused on the commissioning of the second phase of the Zhejiang Petrochemical Project, which will increase the supply of 5 million tons of PX per year from the end of the first quarter to the beginning of the second quarter of 2021, which will rebalance the ongoing efforts The PX market puts pressure on and keeps supply and demand relatively unchanged since 2020. In addition, Saudi Aramco's 850,000-ton/year PX plant in Jizan, Saudi Arabia, will be put into production from the second quarter to the third quarter of 2021, which will also bring new supply to the market.

　　 An Asian PX manufacturer said that the good start of 2021 due to increased demand may be short-lived. Once the second phase of the Zhejiang Petrochemical project is put into production, the pressure of oversupply in the PX market may reappear.

　　 European market demand is weak and uncertainty increases

　　 A European trader said that market participants usually reserve PX goods in winter and spring for the peak summer demand period, but the epidemic may make market conditions different in 2021.

　　 Many market participants predict that the only export market for European PX goods will be the United States. Europe expects that due to weak domestic demand, PX will have an oversupply. Therefore, the situation in early 2021 may not change. Some market participants believe that PX producers outside of China should focus on rationalizing production to achieve market rebalancing.

　　 Market sources said that if the production margin rebounds and there is enough capacity to increase the operating rate or restart production, the long-term recovery of the PX production margin may be difficult.

　　 The launch of the new crown vaccine and the pace of end-user recovery after the pandemic have increased the uncertainty of market demand. At the same time, European market participants are busy digesting their excess inventory, and it is expected that China's new PTA capacity will have minimal impact on its market.

The U.S. market faces internal and external attacks

　　 The growth of PX production capacity in Asia from 2019 to 2021 has already affected the price of PX in the global market (including the North American market).

PX producers in the United States struggled throughout the third quarter, mainly due to planned and unplanned shutdowns of mixed xylene (MX) production facilities on the Gulf Coast of the United States, which led to a strong increase in the price of MX, the main raw material for PX production, which affected the economy of PX production. Negative impact. In the third quarter, the average spot price difference between PX and MX in the United States was only slightly higher than US$56/ton, which was below the break-even point.

　　 In addition, market participants claimed that the PX output of the toluene conversion unit in 2020 is minimal because the profit margins of selective toluene disproportionation (STDP) are often negative, and economic conditions are unlikely to improve in 2021.

　　 US PX producers may continue to compete with low-cost imports from the US Atlantic coast. From 2019 to mid-November 2020, U.S. PX imports increased significantly by 45%. According to sources, in the second quarter of 2020, the cost of PX imports on the East Coast of the United States will be lower than the cost of production on the Gulf Coast of the United States.

　　 As PX devices in other regions reduce their operating rates and stop production, the price of PX in the United States may ease in 2021, but the outlook is still not optimistic.