Amid bullish feedstock Naphtha prices and global shipping turmoil, European Mixed Xylene prices increase

Rotterdam (The Netherlands): Mixed Xylene prices have persistently increased across the European market in the last week of January 2024, supported by high upstream costs and inadequate inventories within the regional market. Although demand from the downstream industry has remained inactive amid macroeconomic headwinds and low seasonality, it was insufficient to drive the price realizations of Mixed Xylene to lower levels in the region. On the other hand, Red Sea instability wreaked havoc on all markets, including Mixed Xylene. The crisis caused the maritime industry to suffer from soaring freight charges, equipment shortages, supply delays, and longer lead times, resulting in the largest disruption to supply chains since the pandemic.

According to ChemAnalyst's latest database, Mixed Xylene prices have witnessed an increment of USD 30/MT in the German market. Cost support from feedstock Naphtha was sufficient for Mixed Xylene as its prices settled on the higher end in the given time, supporting an uptrend in domestic prices. On the upstream front, crude oil prices substantially increased during the last week of January 2024, with the benchmark closing at WTI USD 74.48/barrel, up by 2%, and Brent crude oil closing at USD 79.51/barrel, up by 1.08%. The rise in crude oil prices was attributed to geopolitical tensions, a declining currency, a smaller-than-expected decline in U.S. crude storage, and economic stimulus in China. Additionally, extreme winter weather, especially in North Dakota, the third-largest oil-producing state, caused a decrease in U.S. crude oil output, further affecting prices. Red Sea Houthi attacks impacted crude oil prices as more ships were diverted off the straight route via Suez to Europe, increasing energy prices. Attacks by the US and the UK in the Red Sea added to tensions, potentially surging overall risk sentiment in oil markets. High crude oil prices increased the overall production cost of Mixed Xylene in the domestic market, settling at USD 950/MT during the week ending January 26th.

However, market players report that demand for Mixed Xylene from downstream Xylene derivative industries such as m-xylene, p-xylene, and o-xylene has remained subdued as consumption from the end-user sector has been sluggish in the domestic market. Nonetheless, this had a limited bearing on the prices of Mixed Xylene within the domestic market. Market transactions were mainly based on small orders. Furthermore, major producer BASF is projecting to undershoot its earnings and sales guidance for 2023 due to margin squeezes outpacing cost reduction savings.

In addition, reduced operating rates of Mixed Xylene manufacturing firms have led to limited supplies of finished products, further supporting prices to follow an uptrend in the domestic market. Moreover, disruptions caused by attacks in the Red Sea posed a potential challenge for German manufacturers, introducing chaos into supply chains. The diversion of container ships from the Suez Canal resulted in prolonged transit times and shortages in the German domestic market. Overall, uncertainties about lingering logistic mishaps and emerging risks keep commodity markets, including Mixed Xylene, on edge for the long run.

ChemAnalyst anticipates that Mixed Xylene prices might rise in the upcoming weeks across the European market as market players restock inventories in anticipation of improved demand from the downstream derivative industry. Feedstock Naphtha prices are likely to increase following high crude oil prices, positively impacting the production cost of Mixed Xylene in the regional market. On the flip side, an extended conflict in the Red Sea may severely affect global economic recovery as the crisis rekindles inflationary pressures, disrupting supplies and propelling costs higher. High-interest rates at major central banks may have to be maintained longer than expected if things worsen.