Global PX market will still look to Asia for downstream demand recovery
2023/6/26
Currently, margins for Asian PX producers are relatively stable, with the spread between Asian PX and naphtha remaining above $350/ton. This is lower than the all-time high of $483.83/mt set on March 20, 2023, but is still a good spread. Market participants say the PX-naphtha spread is likely to remain above $350/mt for the next few months, providing an incentive for PX producers to maintain current operating load factors for the rest of the year.
However, with the end of the plant maintenance season and the return of current capacity, pressure on PX supply growth will gradually emerge. 2023 will also be favorable for maintaining profitability as new PX units coming on line in Asia are still operating at fairly limited load factors, which will remain a constraint on supply. However, it is expected that in the coming months, new PX units will steadily increase their load factor and some capacity will come on stream. At that point, it will be difficult for PX to maintain its current margins.
So far, the only factors likely to support PX prices are the growth in Asian terephthalic acid (PTA) plant capacity and the high start-up rates of polyester producers. Currently, with more PTA plants coming on stream and a firm optimism that demand will recover, Asian polyester producers have raised their start-up rates to around 92%. An Asian trader said: "The willingness of PTA producers to operate may support the strength of PX. But so far, Asian demand has not fully recovered, and some market participants have even become disillusioned with 2023 and have now shifted their focus to the third quarter of 2023, or even 2024."
The current economic woes in both the U.S. and Europe have further dampened polyester exports from Asia and dampened market sentiment, and local markets are not optimistic. European PX spot market demand is expected to remain weak, which, coupled with weak downstream market demand for PTA and polyester, may affect consumption of industry chain products. Due to cooler than expected weather in May and inflation affecting the purchasing power of end consumers, the current consumption of polyethylene terephthalate (PET) bottles in Europe remains below normal and demand for PX and PTA will also be affected. In addition, because of the impact of fierce competition from Asian products, the amount of PX used for spot consumption is also at a low level. A European distributor said, "Some big producers may stop production until 2024."
On the U.S. demand side, a highly anticipated U.S. plan to blend aromatics into gasoline by PX producers ended in failure, causing PX prices to fall in the run-up to the summer driving season. Against this backdrop, U.S. PX consumption trends were unable to boost market sentiment. As the North American travel season approaches, demand for Asian PX and other aromatics cargoes will be limited despite the recent improvement in U.S. gasoline consumption. In fact, the market was supported by a surge in U.S. PX imports in early 2023. According to the U.S. International Trade Commission, U.S. PX imports rose 80% year-over-year to total 270,000 tons in the first quarter of 2023, compared to 150,000 tons in the same period in 2022. However, the initial optimism quickly faded away as U.S. consumption trends softened due to poor macroeconomic fundamentals.
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