Expected Demand Decline to Impact Chinese Paraxylene Market

Ningbo, China: After edging high in May-June, Paraxylene prices have been pulled back. The losses in Paraxylene came in tandem with the downward trajectory in both crude oil prices and downstream Purified Terephthalic Acid (PTA) costs in China. According to the ChemAnalyst database, the prices for Paraxylene dipped by 6.5% as of 8th July 2022. Meanwhile, reducing cost pressure from Crude Oil also aids in the smooth running of the unit as PTA plants with low inventory may restock Paraxylene, and new upcoming PTA plants may prepare feedstock in advance. While as the market moves to the earlier price range, Paraxylene is still in the turmoil of an intense situation against the weak expectation of demand.

Today, the feedstock crude oil prices dropped due to growing speculation around a possible demand plunge from the European market and increased restrictions in China. Furthermore, the crude oil market is worried that the Federal Reserve may raise interest rates significantly more than expected, and the oil price is under pressure. The market focus is mainly on the fundamentals of tight supply. But, in terms of its raw materials, Benzene, Toluene, and mixed xylene, the value of all have dropped and stabilized over the last two days. In addition, with China's domestic Mixed xylene price declining, Paraxylene and mixed xylene relations have narrowed. Inline, Sluggish downstream demand from Purified Terephthalic Acid (PTA) and polyester industries negatively impact its production. Polyester inventories continue accumulating, pressuring the yarn manufacturers to reduce their operating rate by 60-80%.

At the same time, due to the continuing epidemic and seasonal typhoons, China's major ports, such as Ningbo, Shenzhen, and Hong Kong, will face the pressure of port congestion and berth congestion. It was reported that the yard density of other major ports in Asia reached 80%, while Busan, South Korea, was at 85%. Thailand's PTT No. 1 unit at Rayong, with a production capacity of 560,000 Mt/year, has resumed after a month-long maintenance period.

Thus, ChemAnalyst Prediction states, "The demand for Paraxylene is expected to weaken as downstream industries have sufficient stockpiling. Further, the industry usually cuts production during the peak season for electricity demand in summer. It also reduces its operating rates, which might further drag down polyester and downstream plant operating rates and affect the product's market.