Large paraxylene spreads to benefit refiners, petrochemical firms in South Korea

27-Jun-16

South Korean oil refineries and petrochemicals firms are likely to log decent earnings this year due to the widening paraxylene spreads on account of solid demand and dwindling supplies, as per industry sources reported in The Investor (theinvestor@heraldcorp.com).

According to the sources, PX spreads stood at US$382.96/ton this month. The spreads fell below US$300/ton in 2014 due to a supply increase amid sluggish demand, after staying between US$500 and US$700/ton in the early 2010s. PX spreads have been widening since late last year, reaching US$418.98/ton in February, US$426.55/ton in March and US$408.63/ton in April. The break-even point for local refiners is estimated at approximately US$250/ton.
The recent surge in PX spreads is caused by some foreign companies suspending their production facilities for maintenance and technical glitches. No. 1 oil refiner SK Innovation and its affiliates have a total PX capacity of over 3 mln tons, followed by S-Oil with 1.8 mln tons, Hanhwa Total with 1.7 mln tons, GS Caltex with 1.35 mln tons and Hyundai Oilbank with 1.18 mln tons, sources said. They noted that the PX spreads will increase down the road as demand for polyester is expected to remain strong.

“Supply of paraxylene in China, the world’s largest buyer, is declining, while demand is rising, which will widen PX spreads,” said Noh Woo-ho, an analyst at Meritz Securities.