PX-naphtha spread at over 4 month low amid slow downstream demand, plant restarts

Margins for paraxylene production in Asia have come under pressure recently with the PX-naphtha spread hitting a more than a four-month low on Monday at US$366.55/mt, Platts data showed. PX was assessed at US$785.67/mt CFR Taiwan/China, down US$10.66/mt day on day Monday, and naphtha at US$419.13/mt CFR Japan, down US$5.25/mt on the day. The PX-naphtha spread, which is crucial to integrated PX producers, was last seen at a lower level on January 15, at US$360.2/mt. Lower demand in downstream polyester and purified terephthalic acid markets, as well as completion of turnarounds at PX plants, were seen to be the main factors behind the weakness in PX margins. The spread between PTA and PX keeps narrowing, which will squeeze the spread for PX [against naphtha], and the total balance for PX is [seen to be] long," a Chinese end-user said. Several of the Asian PX plants that were shut for maintenance in the second quarter have restarted with operations back at normal rates. At the same time, the typical peak demand season for polyester and PET production was waning, sources said. The PX-naphtha spread was now at a more realistic level and it was likely to hover around $350-390/mt going forward, some sources said. The current spread was more than enough to cover production costs and earn slight profits for integrated producers, some of whom have a breakeven level in the low US$200s/mt, they added. But for unintegrated PX producers, the crunch in the spread between PX and feedstock isomer-grade mixed xylenes has eaten into profit margins. The spread fell to record lows, with CFR Taiwan/China PX marker versus FOB Korea isomer-MX marker assessed at US$96.67/mt Monday -- its lowest in seven and a half years. The spread was last assessed any lower on November 20, 2008, at US$76/mt, data showed. Reacting to the poor spread, a source close to unintegrated PX producer Lotte Chemical in South Korea said that the company could see no foreseeable restart date for their No. 2 PX plant at Ulsan, which continues to remain shut. The plant, which has the capacity to produce 525,000 mt/year of PX, was shut towards the end of March.
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