China PX supply and demand short-term forecast

Crude oil pared gains obviously, while PX remained largely strong in Jul though the price trimmed some rise.

In terms of economics, PX-naphtha spread hovered at $240-260/mt CFR, a relatively high range.

The market is currently focused on and change in PX supply and demand.

On supply front, Zhejiang Petrochemical’s new PX unit got on-spec product on Jul 23, but when it could achieve stable PX supply is still dependent on when it will run at full swing. Hence, the start of the new plant affected more on market sentiment.

Dongying Weilian shut its PX plant on Jul 12 for scheduled maintenance, while other domestic plant kept high operating rates. Based on preliminary estimation, with Zhejiang Petrochemical’s new plant starting production, the average operating rate of China domestic PX plants could still maintain around 85% in Aug.

In terms of imports, China imported 6.845 million tons of PX in Jan-Jun 2021, down 3% from the same period of last year. The imports averaged 1.14 million tons a month in the first half of 2021, little changed from 1.155 million tons a month in 2020. PX imports increased month-on-month in Jun.

The turnaround season for PX plants is coming to an end, and schedules of maintenance plant are limited. Besides from Dongying Weilian’s plant, Taiwan FCFC’s 720kt/yr plant is still under maintenance. India’s Reliance plans to shut its 2.25 million mt/yr PX plant in Aug for 2-week maintenance, while Japan’s ENEOS plans to restart its 420kt/yr PX plant in Aug. Therefore, Asian PX plant operating rate is expected to keep high in Aug, especially in South Korea, where plant operating rate is expected to maintain around 90%. As a result, China PX imports would remain high.

In terms of demand, PTA margins improved with the price rising as spot supply was tight, futures market was buoyant and logistics could be affected by the typhoon. As of Jul 22, PTA-PX spread was at around 775yuan/mt, new high in 13 months. Therefore, demand for PX could maintain strong.

PX supply and demand are expected to be largely balanced and the inventory may reduce fractionally in Jul and Aug. However, with the new PX plant to be running stably, PX inventory could rise again in Sep, while some PTA plant maintenance could be delayed to Sep.

In a conclusion, PX supply and demand fundamentals may keep strong in the short term, supportive to PX prices. However, with new plant starting production and maintenance coming to an end, upward space for PX-naphtha spread would be limited.