China PX inventory to increase with new plants starting

In the first 11 months of 2022, China PX inventory has dropped for 9 months, as operating rates of Asian PX plants were relatively low, some Middle East-origin goods were diverted to other regions, and PX production was affected by attractive profits in refined oil products. As a result, PX stocks at PTA plants were tight and some PTA producers faced with shortage of feedstock.

However, tight PX supply could get relieved in the coming months.

1. New plants going to materialize production

Shenghong has so far raised the operating rate of its first new 2 million mt/yr PX line gradually to 65% since the trial run in early Nov, and is poised to further hike to 80%. The other line with same capacity is under inspection and if the handover is successful, it may begin trial run in Dec and contribute production from Jan 2023.

Dongying Weilian’s Phase II new 1 million mt/yr PX plant is expected to get products in end-Nov and is likely to begin production in Dec.

PetroChina Guangdong’s fresh 2.6 million mt/yr PX plant is poised to start in end-Dec or Jan, and could begin production in mid-Jan or late Jan.

CNOOC Daxie’s new aromatics complex has achieved mechanical completion in mid-Nov, and its 1.6 million mt/yr PX unit is expected to start in Feb 2023 with production to commence in Feb or Mar.

Among the existing plants, Sinopec ZRCC’s PX plant is expected to complete maintenance and restart with production increasing in Dec. During Dec 2022 to Feb 2023, there could be limited maintenance plan, while Saudi’s Rabigh may shut its plant in Dec for 45-day maintenance and ExxonMobil (Singapore) may shut one 550kt/yr PX line in Feb for maintenance.

2. Anemic growth of demand

Due to lack of demand, operating rate of mills and DTY plants declined sharply in late Oct, and polyester plant operating rate fell in tandem, down by 10 percentage points from early Nov as of the end of the month. However, despite the operating rate drop, polyester plants could hardly reduce the high product inventory to the target range. In addition, the profit of polyester filament yarn is still negative, and therefore, polyester plant operating rate may further move lower.

As demand is sluggish, PTA producers could barely break even, and feedstock PX supply is tight, it is difficult to raise PTA plant operating rates. In addition, during the negotiation for 2023 PX term contract and PTA contract while demand is expected to further weaken during Spring Festival in Jan, the incentive to PTA plant operations gets subdued. 

Dongying Weilian’s new 2.5 million mt/yr PTA plant at Shandong Province is currently under trial run and may start production in Dec while keeping the operating rate at around 50% in the initial stage. Jiatong Energy (Tongkun)’s new 2.5 million mt/yr PTA plant would also make little contribution to production as its polyester production is cut and negotiation for PX term contract has not yet concluded.

3. PX imports

China PX imports are estimated to maintain around 800kt a month in the coming months, but the volume in 2023 would still be dependent on the negotiation of term contracts. Plant operating rate outside China is largely stable with limited maintenance. Though the arbitrage window for aromatics from Asia to US remains open, the trading is less active with price spread stabilizing and MX price spread even narrowing slightly.

In a conclusion, estimated based on PX and PTA supply and demand, the deficit of PX in China could get alleviated starting from Dec. In that case, during Dec-Feb, China PX demand is expected to exceed supply by 400~600kt a month, indicating requirement for only 400~600kt of imports per month to get the supply and demand balanced. Then, plants outside China would under immerse pressure, and could lower operating rates. However, as PTA plants would have restocking demand due to tight PX inventory, China PX imports would not shrink to that low.

It is undeniable that with new PX plants starting, the localization of PX supply in China would enhance, and PX inventory could begin increasing in Dec 2022, by an estimated 200kt a month.