Zhao Ming, Sinopec Tianjin Company Business Planning Department
Para-xylene (PX) is used to produce purified terephthalic acid (PTA) or dimethyl terephthalate (DMT). Huge demand for PTA has been boosting the PX industry development and led to the rise of the PX industry in recent years.
Despite the spreading Covid-19 pandemic around the globe, the vaccine rollouts and economic stimulus measures, as well as the favorable OPEC production policy may keep global crude values firm, giving support to PX costs. Downstream PTA prices lack growth steam and spot prices have softened, amid expectations about increasing domestic supply and slowing demand. New PTA capacities are coming on stream successively.
Supply-demand analysis in H1 2021
Sinochem Quanzhou’s new 800 kt/a PX capacities came on line in January 2021. However, domestic output posted limited year-on-year increases, with plants’ operating rate falling dramatically, as shown in Table 1.
Average run rate of domestic PX plants stood at 80.18% in the first half of 2021, compared with 83.43% in the same period of 2020. Despite the severe pandemic in 2020, PX margins surged as naphtha prices dropped below crude values in March-April, motivating domestic PX producers to scale up production.
PX plants’ run rate was low in the first quarter of 2021, due to maintenance shutdowns at Ningbo Zhongjin Petrochemical, Qingdao Lidong, Zhejiang Petroleum and Chemical and Shanghai Petrochemical. The operating rate rose significantly in May-June, following the completion of turnaround and the production recovery at Fuhaichuang’s long-idled unit. Table 2 shows China’s PX plants turnarounds in 2021.
Downstream output has increased sharply with new capacities launching production. New domestic PTA capacities are shown in Table 3. Domestic PTA output reached 26 190 kt in January-June 2021, up by 2 693 kt or 11.46% year on year.
Table 3 China’s new PTA capacities (10kt/a)
Import analysis in H1 2021
China imported 5 708 kt of PX in the first half of 2021, down by 45 kt or 0.78 percentage points year on year. Despite limited increases in domestic output, import volume only decreased slightly as some downstream producers purchased imported cargoes to prepare for their new plants’ start-up.
Forecast for H2 2021
On the supply side, only Zhejiang Petroleum and Chemical’s 2 500 kt/a PX unit achieved mass production in August, while Dongying Weilian Chemical, Fujian Refining and Petrochemical and Fujia Dahua may have turnaround plans. Domestic PX output are expected at 12 650 kt in the second half of 2021, up by 2 175 kt or 27.76% from the first quarter of the year and up by 2 275 kt or 21.82% year on year.
On the demand side, domestic PTA output is estimated at 28 500 kt in the second half of 2021, up by 8.7% from the first half of the year and up by 10.1% year on year. As such, the PX supply gap may stand at 6 020 kt in the second half of the year, with the average monthly gap at 1 003.3 kt, compared with 1 121 kt in the first half of the year. Hence, the supply pressure is expected to remain heavy. PX processing fees are unlikely to continue surging and the price spread between PX and naphtha may hover at US$200-260/tonne.
Forecast: Asian PX plants may maintain relatively high operating rates, especially that the expected start-up of Zhejiang Petroleum and Chemical’s new Phase II 2 500 kt/a capacity will weigh on market sentiment. The crude oil market may remain firm but there are still uncertainties. The growth in global crude oil values has shown signs of slowing down amid rising US output, which provides limited cost-side support to PX. Downstream PTA spot and futures prices are fluctuating downwards amid increasing domestic supply and relatively weak demand from the polyester sector. To sum up, PX prices are likely to inch down to US$880-960/tonne CFR China and may fluctuate downwards in August-October.
