PX economics recover, but inventory would continue reducing

Since the end of the first quarter of 2025, the profitability of reforming and aromatics in Asian refineries has significantly compressed, forcing multiple China and Asian refineries to reduce operating rates. The unexpected loss of PX production has been notable, compounded by planned plant maintenance, leading to an obvious tightening of PX supply in Asia.

However, the recent unexpectedly high operating rates in downstream polyester plants have pushed PX demand beyond market expectations. Against the backdrop of inventory reduction, PX spot supply has recently been tight, with noticeable restocking demand from downstream PTA plants, driving a rapid recovery in PX prices and economics.

As of May 9, PX price has risen by 12% from their yearly low to $785/mt CFR. The spot price for Jun cargoes was at $6/mt or $7/mt discount to formula pricing before May Day holiday, but up to flat level on May 9, new high in nearly one year. PX-naphtha price spread has rebounded by 39% from its low point to $224/mt on May 9. At the same time, with the rise in PX price, the PX-MX spread on yuan basis has also quickly climbed to yearly high.

However, as profitability improves and PX spot floating prices continue to strengthen, PX may face some marginal changes in the future, which deserve market attention.

Based on current restart schedules and the supply-demand dynamics of PX, the market is still expected to see inventory reduction in the coming months.

1. Planned recovery of PX operating rate

Several domestic plants are gradually completing maintenance and restarting in China in May. For example, ZPC's 2.5 mln mt/yr unit restarted in early May, and Sinopec Jiujiang's 900kt/yr unit and CNOOC Huizhou's 1.5 mln mt/yr are going to restart in the second weekend or the third week of May.

Although some units may experience unexpected shutdowns or further maintenance-related reductions, on overall basis, the lowest point for China domestic PX operating rates has passed.

For overseas operating rate, based on current maintenance schedules, PX run rate could decline further until possibly the end of May before gradually recovering.

2. PX economics recover

With the recent recovery in profitability, the economic viability of the short-process PX production route based on MX has improved significantly. The Chinese yuan-denominated PX-MX spread, in particular, has exceeded 900yuan/mt. Although some high-cost producers still face pressure in terms of logistics and other expenses, integrated or low-cost producers are already seeing marginal profitability. As a result, there have been recent reports of active MX procurement by some domestic PX plants.

For MX, China domestic gasoline performance remains lackluster, and with maintenance completing and new MX supply expected in the future, MX prices are likely to remain relatively weak.

Therefore, attention should be paid to the potential marginal increase in PX supply as some plants raise operating rates in response to the widening PX-MX spread.

Although the USD-denominated PX-MX spread has also widened, refinery reforming margins in Asia remain subdued based on current situations. At the current PX profitability levels, refineries lack strong incentives to increase reforming rates. Additionally, maintenance at some Northeast Asian plants has tightened spot MX supply compared to earlier periods, making it less likely for overseas plants to procure MX for PX production hikes in the near term. Thus, any increase in operating rates is expected to be primarily driven by China domestic producers.

3. Trading Dynamics

Recently, the spot PX market has seen active buying interest, particularly for near-month cargoes, with the June/July spread shifting into a backwardation structure. However, by May 15, negotiations for June cargoes will conclude, and market focus will shift to July and August contracts.

From a trading perspective, the extended procurement window for July spot cargoes gives PTA plants more time to evaluate and secure supply. This could lead to less aggressive spot buying momentum.

In a conclusion, China PX inventories remain relatively tight, and strong restocking demand from PTA plants has driven the recent rapid price surge. However, as profitability improves, some marginal supply increases may gradually materialize-though this has not yet disrupted the overall PX inventory reduction trend.

Looking forward, market participants should monitor whether improving economics prompt major plants to cancel or delay maintenance plans, which could alter the supply-demand balance.