PX supply growth may outpace demand with plants restarting

PX plant turnaround season is about to complete gradually in the end of this week or the beginning of next week. During end-May to end-Jun, there will be several plants with combined capacity of 7.67 million mt/yr to restart.

Therefore, China and Asian PX plant operating rates are expected to rise obviously in the near future. However, some plants would undergo turnarounds in Jun.

China PX plant operating rate is anticipated to increase from the current 72% level to 80% in end-Jun, and Asian PX plant operating rate is likely to rise from 70% to 75% over the same period, to hit 1-year high.

However, as PX margins has squeezed recently, the upward space for PX plant operating rate could be capped.

At present, the economics of PX based on yuan MX or USD MX as well as based on TDP unit are poor and even in negative territory. Toluene price has even exceeded that of benzene on USD basis, reflecting losses for TDP units. Therefore, some units are heard to cut TDP operating rates, and hence PX production is affected. In addition, some plants are heard to reduce PX operating rate slightly in Jun due to the meager profits, cushioning some impact from supply increase from plants restarts.

In terms of supply and demand, with the increasing domestic production as well as rebound in PX imports which are estimated to rise to 800kt a month, China PX inventory may halt the reduction after two months of decline, and then supply may turn balanced to demand or outpace demand with inventory increasing slightly.