Bearish sentiments spilled over to the European Mixed Xylene market in early January 2024

After experiencing a bullish rally in the prior month, Mixed Xylene prices have decreased in the European market during the first week of January 2024. Although market players anticipate Mixed Xylene prices might recover due to the weak demand, Mixed Xylene prices have operated at a low level across the regional market. Furthermore, oversupply along with stable feedstock prices has further supported the prices to follow a downward trend.

The Mixed Xylene market has been subdued across the German market as most players are yet to get back into harness following year-end festivities. According to ChemAnalyst's latest database, prices of Mixed Xylene have demonstrated a decrement of USD 10/MT during the week ending 5th January 2024. For the past three weeks, feedstock Naphtha prices have been stagnant, resulting in the stable domestic production cost of Mixed Xylene. On the upstream front, international crude oil prices plunged by nearly 4% after Saudi Arabia signalled potentially tepid demand ahead by cutting the prices of its oil. The decline in crude oil prices has further eased the overall manufacturing cost of Mixed Xylene.

On the demand front, the pace of inquiries originating from downstream Xylene derivatives such as o-xylene, p-xylene, and m-xylene has remained dull as consumption from the end-user sector has not yet recovered ahead of off-season dullness in the domestic market, leading to bearish market sentiments for Mixed Xylene among manufacturers. Furthermore, the lower Mixed Xylene prices have made it challenging for Mixed Xylene manufacturers to maintain profitability, leading to a wary approach regarding production and inventory management. Meanwhile, procurement from the overseas market has been soft and is not expected to recover in the near term. Moreover, German inflation rebounded in December amid base effects, putting a temporary halt on the downtrend seen in the prior months and possibly offering the European Central Bank an argument in favour of keeping interest rates steady for some time, further deteriorating the consumer pocket.

Apart from this, manufacturing firms have not operated at full rates within the domestic market as participants reported no sign of recovery in downstream demand. German industrial production surprisingly reduced by 0.7% in November 2023, mirroring a contraction in new orders. Despite this, the availability of finished stock of Mixed Xylene was at a higher level, which encouraged manufacturers to destock their inventories at low prices. Thus, from the above-mentioned scenario, prices of Mixed Xylene were settled at USD 860/MT on an FOB Hamburg basis.

ChemAnalyst expects Mixed Xylene prices might recover across the European market in the forthcoming weeks. The prices will be driven more by cost pressure and restocking needs than a firm return of downstream demand. However, demand from the downstream industry is projected to remain bleak into the second half of 2024 as the Eurozone continued to show substantially reduced manufacturing output after its economy contracted by 0.1% in Q3 of 2023.