Paraxylene production in NWE to be unchanged amid bearish outlook as facilities come onstream in Asia

30-Jul-14

Incremental paraxylene production in Northwest Europe is expected to remain unchanged in the coming months despite improved cash margins, amid a bearish outlook in light of new production facilities coming on stream in Asia, as per Platts. The monthly premium of PX FOB ARA over CIF NWE naphtha cargoes, one of the indicators of PX production economics, has so far in July averaged US$375.11/mt, the highest since the beginning of the year. Nevertheless, this still 23.5% lower than the average premium during 2013, Platts data shows. Market participants said that this is insufficient to trigger incremental production. Sources previously said that the premium should be around US$450-500/mt. "Prices in Asia will collapse, without a doubt and they [Asia] will start to export to the US, [consequently] Europeans which have no contracts here will be in trouble," one source said. "Depends where the best alternative is, for naphtha various things can be done with it and PX is not the only alternative. It is true to say that the Asian outlook does not seem very bullish with all the PX coming on stream," a second source said. Expectations of additional supplies coming from the new production facilities in Asia have led to the market weakening for three consecutive trading sessions. This week, South Korea's SK Innovation started up its 1.3 million tpaPX plant in Incheon, while Samsung Total's new 1 million tpa No. 2 Daesan plant was started up early this month and was shipping out on-spec PX.