Toluene and MX supply expected to increase

Crude oil corrects down recently as the geopolitical tension eases with the fourth round of negotiation ongoing, and US Fed hikes interest rate by 25 basis points.

Tracking the slump in crude oil, petrochemicals including naphtha, toluene, MX, benzene, styrene and PX decline in tandem. Recently, with naphtha remains on the high side, toluene processing spread has slipped to negative territory, and MX processing spread hovers at around break-even line. PX based on MX as feedstock is also under losses. Benzene-to-toluene spread has narrowed, reflecting poor TDP profits.

Toluene processing spread = CFR China toluene – CFR Japan naphtha - $120/mt

MX processing spread = CFR China MX – CFR Japan naphtha - $150/mt

Based on maintenance of refineries and PX plants, toluene and MX supplies are expected to increase.

Maintenance and startup schedules

Sinopec HRCC began maintenance on its refinery and 660kt/yr PX plant on Mar 15 lasting 2 months. As it relies on purchasing merchant MX with plants running, the shutdown would lead to lower appetite for MX and increase of MX supply in the market.

Sinopec Yangtze plans to shut its 890kt/yr PX plant on Mar 25 for scheduled maintenance for 2 months and its reformer in end-Mar. It would also result in increase of MX supply in the market after the shutdown of PX plant, as the producer buys MX for PX production.

Sinopec ZRCC sells toluene and uses MX internally. With its PX plant and TDP unit going maintenance starting from late Apr, toluene supply would increase in the market.

In addition, Shenghong Refining plans to start the new 9.3 million mt/yr reformer and 1.1 million mt/yr cracker in Apr-May, and if the plants are started as scheduled, the producer would sell a part of toluene and MX.