Toluene and mixed xylenes: supply growth VS demand support

Since the beginning of September, China toluene and mixed xylenes markets have been consolidating. On the one hand, new plants such as Yulong and CNOOC Daxie, started in Jul and Aug, continued contributing to increasing supply. Daxie sold a total of 6 shipments of MX in the week ending Sep 19. In addition, overall toluene and MX plant operating rates were largely stable with less plant maintenance in Sep.

On the other hand, downstream demand was supportive to toluene and MX prices. PX margin based on MX was healthy, and some MX cargoes directly went to PX production. Meanwhile, stocking requirements for gasoline blending components prior to China's National Day holiday in the beginning of Oct picked up, accelerating the offtaking of cargoes from coastal reserve areas.

PX-MX spread stayed on the high side recently, indicating good economics for PX based on merchant MX. As a result, Hengli, Shenghong and Weilian Chemical continued buying MX. Fuhaichuang has restarted its PX units in early and mid-September. And in addition, Sinopec Shanghai is slated to shut its reformer in the fourth quarter for maintenance, while the maintenance on its PX unit has been postponed to next year, and therefore, it would require MX as feedstock supplement.

Supported by gasoline blending demand in Sep, offtaking of toluene accelerated to about 20,000 tons in early and mid-Sep and MX totaled 25,000 tons in the same period. Some MX cargoes went directly to PX units while cargo arrivals to reserve areas were limited, keeping MX inventory on the low side. Toluene inventory increased slightly with cargoes arriving.

Looking forward, PX supply and demand dynamics are expected to soften, with supply increasing but several PTA units undergoing maintenance. PX-MX margin is projected to narrow, and the support from gasoline blending is expected to ebb in slack blending season. In addition , with some units in Shandong and Henan restarting, domestic toluene and MX supplies are anticipated to increase.