Amid Weak Feedstock Prices and Long Supply, US o-Xylene Prices Decline

Texas, (US):  In the third week of May 2024, Ortho-Xylene (o-xylene) prices have softened across the US market. Low upstream costs and adequate inventories were the main culprits behind the bearish trend in the regional market. However, demand for o-xylene from the downstream Phthalic anhydride industry has steadily improved, with expectations that it may increase in the coming weeks.

According to ChemAnalyst's latest database, prices of o-xylene have declined by USD 38/MT in the US market. The raw material Mixed Xylene prices have continuously decreased, resulting in lower production costs for Mixed Xylene and a downward shift in the price realization of o-xylene in the domestic market. Additionally, crude oil prices have fluctuated since the start of May 2024; however, in the last week, crude oil prices edged up, illustrating a stabilizing US job market. This has fuelled expectations that the Federal Reserve could begin to cut interest rates in the autumn, which should stimulate the economy and boost oil demand. The rise in oil prices has had a lukewarm impact on the feedstock Mixed Xylene amid weak demand.

Demand for o-xylene from the downstream Phthalic anhydride industry has marginally increased despite higher mortgage rates. Consumption of Phthalic anhydride from the end-user construction sector has improved. According to market sources, new residential construction in the US rebounded in April, although the report also unexpectedly showed a continued decrease in building permits. Additionally, housing starts surged by 5.7 percent to an annual rate of 1.360 million in April after dropping by 16.8 percent to a revised rate of 1.287 million in March. Nonetheless, it was insufficient to drive the price realization of o-xylene higher in the domestic market.

Manufacturing firms have been operating at normal rates in the domestic market, resulting in abundant material availability to meet downstream demand, further weighing down the prices of o-xylene in the domestic market. Despite this, US manufacturing activity contracted in April after briefly expanding in March. According to market sources, the US Manufacturing Purchasing Manager Index settled at 49.2 in April, below the threshold of 50. As a result, prices of o-xylene FOB Louisiana were settled at USD 1160/MT during the week ending 17th May.

On the other hand, global rates for shipping containers are surging, liquid chemical tanker rates were mixed, and wait times at the Panama Canal have eased, highlighting this week’s logistics roundup. Starting May 16, the Panama Canal Authority (PCA) might increase the transit slots for Panamax vessels. Additionally, based on current and forecasted water levels in Gatun Lake, another slot for Neopanamax vessels will be added on 1st June. Thus, it is expected that the supply of o-xylene will further increase in the near term.

Moreover, the Key Bridge Response Unified Command (UC) is scheduled to use precision cuts made with small charges to remove a large section of the Francis Scott Key Bridge wreckage from the container ship Dali, which hit the bridge on March 26 and caused it to collapse. However, the closing of the port did not have a significant impact on the chemicals industry, as chemicals make up only about 4% of the total tonnage that moves through the ports.

Looking ahead, ChemAnalyst expects prices of o-xylene to increase in the US market due to the anticipated rise in demand from the downstream Phthalic anhydride industry. Furthermore, feedstock Mixed Xylene prices are anticipated to increase, driven by a strong bullish forecast in crude oil price, which may raise the prices of o-xylene in the coming weeks. On the macroeconomic front, inflation is expected to ease, which may further improve consumer buying sentiments.