The price spread between Asian paraxylene and isomer-grade mixed xylenes shrank $9/mt day on day to a one-year low of $175/mt on a CFR basis Wednesday as PX prices turned top heavy while MX remained bullish, Platts data showed.
Asian isomer-MX rose $13/mt day on day to $1,309.50/mt FOB Korea and rose $9/mt to $1,327.50/mt CFR Taiwan Wednesday on firm buying interest and an uptick in the US MX market. The Asian PX market was flat over the same period at $1,479/mt FOB Korea and $1,503/mt CFR Taiwan/China, capped by active selling pressure.
ISOMER-MX MARKET TIGHTENS ON TURNAROUNDS, CLOSED ARBITRAGE
Asian isomer-MX has been relatively firmer than downstream PX market on upcoming turnarounds in Japan and South Korea, and from the short-lived US-Asia isomer-MX arbitrage, according to market sources.
Asia could be looking at a shortfall of around 120,000 mt/month of isomer-grade mixed xylenes from late September through October due to the refinery turnarounds.
In Japan, JX Nippon Oil and Energy shut its 470,000 mt/year of isomer-MX unit at Sendai in September for a one-month scheduled turnaround, while Cosmo Oil shut its its No. 1 aromatics unit at Chiba in September for a 45-day turnaround. Cosmo Oil's No. 1 and No. 2 aromatics units at Chiba have a combined capacity of 270,000 mt/year of isomer-MX.
Cosmo Oil will also likely to shut its 300,000 mt/year of isomer-MX unit at Yokkaichi in October for a scheduled turnaround.
South Korea's SK Energy plans to shut its 500,000 mt/year of isomer-MX unit at Incheon for scheduled maintenance in late September.
Japan-origin isomer-MX accounts for 25% of total Asian supply at about 800,000 mt/year to 1 million mt/year, according to market sources. South Korea-origin isomer-MX also accounts for 25%, they said.
The US-Asia isomer-MX arbitrage shut on paper on August 13 after being open for about a month, hit by higher US prices. At the time, the isomer-MX spread between CFR Taiwan and FOB USGC was $48.64/mt, down $12.65/mt from a day earlier.
For the arbitrage economics to work, the Asia-US spread must be above $50/mt, based on a discounted term charter freight rate from the Gulf Coast to South Korea or Taiwan. Spot freight rates for the same route are currently at $78/mt for a 5,000-mt BTX cargo, according to Platts data.
ASIA PX MARKET CAPPED BY NEGATIVE PTA MARGIN
The Asian PX market has been bearish since negotiators reached no settlement last week for September Asian Contract Prices.
There are four ACP sellers in Asia: ExxonMobil, Japan's Idemitsu Kosan and JX Nippon Oil and Energy, and South Korea's S-Oil. There are six ACP buyers: BP, Taiwan's Capco, Oriental Petrochemical (Taiwan) Corp., Japanese companies Mitsui Chemicals and Mitsubishi Chemical, and China's Yisheng Petrochemical.
During the September negotiations, the bid and offer range narrowed to $1,480/mt CFR and $1,490/mt CFR, respectively, but buyers and sellers were not able to close the $10/mt gap. For August, the PX ACP reached a settlement at $1,440/mt CFR.
Typically, if no settlement is reached, ACP sellers need to sell their term cargoes in the spot market as they only supply minimum requirements to buyers.
In addition, Asian purified terephthalic acid producers -- key PX buyers in the region -- are considering reducing plant operations as margins are shrinking further.
On Wednesday, the Asian PTA margin was calculated at minus $64.98/mt compared with minus $61.98/mt Tuesday. The margin -- calculated by the CFR Taiwan/China PX price, a 0.66 conversion factor and $150/mt conversion costs -- hit a 19-month high of minus $9.72/mt on August 7.
PX PLANT RUNS CUT ON NARROWING SPREAD
Some PX producers have responded by lowered operating rates.
South Korea's HC Petrochem has further cut runs at its No. 2 aromatics plant at Daesan to 70% of capacity from early this week, due to weak production margins for PX, a company official said last Thursday.
"Operating at 70% capacity is the lowest level mechanically," he said. "We have no choice but to cut runs further as improvement of the PX-MX spread seems unlikely in short term."
The No. 2 aromatics unit has been operating at 80% of capacity since August 12, following an initial cut from 100% to 90% on August 1.
The No. 2 aromatics plant, which began commercial operations January 8, is able to produce 800,000 mt/year of PX and 120,000 mt/year of benzene.
South Korea's Lotte Chemical has shut its No. 1 aromatics unit at Ulsan as of August 4 due to weak PX production margins. The unit, which can produce 250,000 mt/year of PX and 90,000 mt/year of orthoxylene, might be shut for at least a month.
"PX supplies are tight because of these run cuts, but it is not pushing up the Asian PX market as PTA plant runs are seen to be coming down," said a trading source.
Thursday morning, the spread remained flat at $175.50/mt as the Asian PX and MX prices were pegged stable from Wednesday.