PX price hits 2-year high, driven by cost and supply-demand

PX price soared to $900/mt CFR on Jun 23, hitting 2-year high. Then, where does the advancing momentum come from?

1. Cost

Crude oil hikes to record new highs in more than two years, as demand for oil products increases in Europe and US with the rising vaccination rate, and US-Iran negotiation is carried out more slowly than expected. As of Jun 23 09:30pm + 08:00, WTI crude futures spiked to $73.75/bbl, up 28.5% from the low point in Mar, and Brent futures surged to $75.74/bbl, up 25.4% over the same period.

Asian naphtha price gained 13% over the same period, tracking the movements of crude oil. However, as olefin margins were squeezed, naphtha price was weighed and its spread to Brent crude narrowed.

As for PX, the price rose by 12.6% as of Jun 23 from the low point of Mar, an increase smaller than that in crude oil. Hence, PX is supported by the sharp gains in feedstock.

2. Demand

Since mid-Apr, China polyester plant operating rate has maintained high. Some PTA plants announced maintenance schedules and some suppliers planned to cut contract supply volume. In addition, PX price dropped fast in early Jun, leading to some recovery in PTA margin. Then, PTA operating rate increased with some maintenance getting delayed, and thus demand for PX was largely stable.

Meanwhile, PX demand was also spurred by the expectation of Yisheng New Materials’ PTA plant. Though downstream polyester market was lukewarm, the plant operating rate remained high, above 90% with no signs of cuts. Therefore, stable downstream operation laid a solid foundation for the rise in PX price.

3. Supply

PX plant operations saw disruptions recently, with Fuhaichuang, Sinopec Fujian, Sinochem Quanzhou and QS Qingdao Lidong reducing operating rates, and CNOOC Huizhou shutting down the plant for trouble-shooting. As a result, China PX operating rate declined in Jun, and the production is expected to shrink obviously from May. Meanwhile, supply from South Korea is also expected to reduce with scheduled maintenance and unplanned shutdown. In addition, China imported 1.037 million tons of PX in May, down 17% month-on-month, also supportive to PX price.

However, PX market is still weighed by the expectation of the new plant. The impact is cushioned by the unexpected shutdown of Zhejiang Petrochemical’s 2 million mt/yr PX plant as well as the slower-than-expected start of the new plant. PX price tracks the sharp rise in downstream PTA and raw material crude oil. The market is expected to stay strong with PX-naphtha spread to widen, until there’s a more clear direction when the new plant starts.