HC Petrochem to cut aromatics run rates on poor paraxylene margins

02-Sep-13

South Korea's HC Petrochem plans to further cut runs at its No 2 aromatics plant at Daesan to 70% from early next week, due to weak production margins for paraxylene, as per Platts. "Operating at 70% capacity is the lowest level mechanically. We have no choice but to cut runs further as improvement of the PX-MX spread seems unlikely in short term," said a company official. The No. 2 aromatics unit has been operating at 80% of capacity since August 12, following an initial cut from 100% to 90% on August 1. The No. 2 aromatics plant, which began commercial operations January 8, is able to produce 800,000 tpa of PX and 120,000 tpa of benzene. For HC Petrochem to break even, the PX/isomer-MX spread must be US$250/mt, the official said, slightly higher than the typical breakeven level of US$230/mt for other unintegrated PX producers. The PX/isomer-MX spread on a CFR Taiwan basis was last assessed Thursday at US$195/mt, according to Platts data, after falling to an 11-month low of US$189.50/mt on July 24. HC Petrochem, which typically buys 80,000 mt/month of isomer-MX via term contracts, will only take delivery of 65,000 mt of the feedstock in September due to the run cuts. "If the poor PX-MX spread continues going forward, we would likely cancel the term buying isomer-MX further, then sell [the remaining] isomer-MX to the spot market and buy PX from the market to offer to our buyers," the source said. "We are even mulling over shutting the No. 2 unit." The company has six term suppliers for isomer-MX, with Japan's Cosmo Oil accounting for 70% or 56,000 mt/month of the volume.