European Paraxylene Prices to Surge in March 2024 Amidst Rising Upstream Costs

The price of Paraxylene in the European market has been on a steady rise, primarily driven by the consistent improvement in upstream Crude oil prices. Crude oil prices have been volatile, experiencing a notable increase at the beginning of March 2024. As of the second week of March 2024, the final price of Brent Crude Oil stood at USD 83.29 per barrel, reflecting a 0.26% increase. Additionally, the Paraxylene plant operated by France TotalEnergies in Gonfreville will be closed for planned maintenance from March 1st to March 24th, 2024. This temporary shutdown is expected to have a significant impact on the short-term supply of Paraxylene in the eurozone. The plant has an active capacity of 2070 TPM and a total capacity of 69167 TPM. As a ripple effect, the cost of Paraxylene in the German market rose by 1.7% during the week ending 15th March 2024.

The upward trajectory of Crude oil prices has a direct impact on downstream derivative industries, including the Paraxylene market. Despite the price surge, the demand for Paraxylene in the downstream packaging industry has remained weak in the European market. This trend suggests that other factors beyond price, such as market dynamics and consumer behaviour, are influencing the demand for Paraxylene in this region.

The demand for Paraxylene in the packaging industry has been impacted by various factors related to the Red Sea crisis. Reduced sales volumes, and disruptions in production schedules have all contributed to a weakening demand from both domestic and overseas customers. Despite these challenges, recent data shows a relatively stable demand for products in the packaging sector, as indicated by the 0.4% increase in the Consumer Price Index (CPI) over the past month. This stability suggests that consumer purchasing behaviour in the packaging sector has remained consistent, even amidst political and economic uncertainties. Companies have noted a hesitancy among their clients, which can be attributed to these uncertainties and the associated increase in financing costs. Despite these challenges, the packaging sector's demand for Paraxylene has held steady, highlighting its resilience in the face of fluctuating market conditions.

Although the effects of the Red Sea crisis have lessened, there is still a scarcity of the feedstock product, leading to price increases. Demand for Paraxylene in the downstream packaging sector has stayed weak, as consumers prioritize cost savings and opt for cheaper alternatives The Federal Statistical Office (Destatis) reported that the Production Index for the Industry expanded by 1% month-on-month basis in January 2024 after seasonal and calendar adjustments. However, it is anticipated to decline in February 2024 compared to January, primarily due to the weaker performance of the industrial sector. Official data for February has not yet been published. Despite a decrease in the Industrial activity, the Paraxylene market expanded in February, and this growth trend is expected to continue into March. This expansion is primarily driven by the increase in upstream crude oil prices, which have influenced the market positively.