Market and product

Asia paraxylene (PX) market fundamentals for 2017 will likely hinge new production capacities coming on stream and on downstream purified terephthalic acid (PTA) restarts.

The market will see some tightness in 2017 during peak demand season, especially for Asian-origin cargoes heading to northeast Asia, while open-origin cargoes will likely see supply lengthening.

Producers are of the opinion that PX could be tighter in 2017, due to news of major downstream purified terephthalic acid (PTA) capacities attempting to restart from the second quarter onwards.

They were also of the opinion that new PX capacities will also be slower to come on stream.

PetroRabigh Phase II’s 1.25m tonne/year PX unit start up can be delayed and on-spec production expected in the fourth quarter of 2017, with supply reaching the market only in 2018.

However, Nghi Son Refinery and Petrochemicals could still bring its 680,000 tonne/year PX unit on stream in the third quarter of 2017.

In 2016, Asia has seen only about 1m tonne/year of new PX capacity coming online in India, as Reliance Industries brought its new 2.25m tonne/year PX unit in Jamnagar on stream in December and slowly ramped up operating rates.

This brings the total capacity of PX in the region to around 48m tonne/year.

In 2017, an additional 3.4m tonnes/year of new PX capacity is expected to come on stream in the region.

Reliance Industries plans to bring its unit to full throughput and PetroRabigh II and Nghi Son Refinery and Petrochemicals will attempt to bring their new PX start ups on line.

Hanwha Total is also set to increase the capacity of its 1m tonne/year No 2 PX line by 20% in the second quarter of 2017 through a two-month long de-bottlenecking project.

Other key units such as Singapore's Jurong Aromatics Corp is likely to continue running its 800,000 tonne/year PX unit in 2017, with no turnarounds planned.

The same goes for China's Ningbo Zhongjin, which has operated stably after an extensive turnaround in the first quarter of 2016. It is also skipping turnarounds in 2017.

“Naphtha-based refiners had enjoyed comfortable margins in 2016. As the new capacities come on stream, it will remain to be seen whether the margins will continue to remain at such high levels,” a producer in Asia said.

Market sources are watching keenly whether downstream PTA units in China like Huabin, Fuling Pengwei and Xianglu Petrochemical will start up on time.

There have been mixed news on whether these units could restart, as there were no physical sales outlets readily available, and transport and logistics issues will increase their operating costs.

The protracted discussions between a state-owned refiner and Xianglu Petrochemical’s owner over stake holdership were also limiting chances of the PTA plant starting up.

However, sources said Huabin had higher chances of starting up a 1.4m tonne/year PTA line in 2017, as its new owners were keen on recouping the money it had spent on buying over the business.

A manageable PX-PTA spread will also encouraged its restart.

Traders who have PX cargoes on hand are harbouring bullish sentiments, optimistic that the possible restarts of these idled PTA units will mean more demand for import cargoes into China, as domestic Chinese PX trade flows could see some changes.

A new supply stream of isomer-grade mixed xylene coming out of Hyundai Chemical’s new 1m tonne/year unit has also led to expectations that 2017 will be a better year for MX-based PX producers, such as Lotte Chemical and Hyundai Cosmo Petrochemical, which have typically seen uneconomical MX-PX spreads.

However, sources said that MX-based PX producers will likely increase run rates in 2017, leading to an overall higher PX operating rate in Asia, with a possible restart of a northeast Asian MX-based PX line in 2017.

There are also fewer turnarounds, as key producers had performance major maintenances on their units in 2016.

In the Chinese Yuan-denominated PX market, domestic producers in east China said market fundamentals could see some improvement with increased demand from end-users which had been previously flat.

The RMB market could trend towards tightness if idled producers such as Fuling Pengwei’s 900,000 tonne/year PTA line, Huabin’s 1.4m tonne/year No 4 PTA line and one of Xianglu Petrochemical’s 1.5 m tonne/year PTA line do start up.

If domestic supply is diverted to local units which restart, causing an incumbent major end-user to go to the merchant market to purchase spot cargoes

However, the market situation will depend on their exact restart dates and operating rates.

Most market sources are in agreement that market fundamentals would change only from the fourth quarter of 2017, as new PX capacities come online and the full supply hits the market in 2018. Contract alphas are expected to see further changes from 2018.

There are even more start ups in the Middle East and China due from 2018 onwards.

Market sources said there were continued negotiations for contract alphas, although some producers were holding out for a rollover of last year’s contract alphas as they were of the view that market fundamentals would change only from 2018.

Discussions ranged from minus $2.50/tonne for Asian-origin cargoes to up to minus $4/tonne for open-origin cargoes.

Buyers are still resistant to a rollover in prices, taking into account new open-origin supply hitting the market late 2017-2018.

This year will also see a new entrant into the Asia Contract Price negotiating circle, with end-user Shenghong Petrochemical set to join negotiations from January 2017.

Reliance Industries said in a statement that it will also join ACP talks from April 2017. - ICIS