The spread between solvent-grade mixed xylenes in South and East China has widened to Yuan 850/mt this week, from more typical levels of less than Yuan 300/mt, due to tight supply in the south, market sources said Tuesday.
The spread has been widening since October 10 when the Chinese market resumed after a week-long holiday, sources said, noting that it was around Yuan 200/mt at the time.
The tight supply of solvent-MX in South China is largely due to production woes by major Chinese producer PetroChina. The latter has been producing off-specification isomer-MX due to feedstock naphtha with high sulfur content from Angola, Platts reported previously. PetroChina has the capacity to produce 500,000 mt/year of isomer-MX.
Solvent MX buyers in South China also use isomer-MX to meet their requirements.
"A price differential of about Yuan 200/mt is normal. If the price difference between East and South China is more than Yuan 300/mt, solvent-MX cargoes between the two regions will be traded," said a Chinese trader, adding that the spread will likely start narrowing.
Other sources said solvent-MX prices in the south have likely hit a peak and are not likely to surge further.
According to sources, solvent-MX prices in South China were Yuan 10,200-10,250/mt ex-works Tuesday, while prices in East China were Yuan 9,350-9,400/mt, which is equivalent to $1,226-1,232/mt on an import parity basis.
"The wide price differential is largely due to supply issues. Prices in the south are affected by supply while prices in the east usually follow market trends of imported cargoes," the trader added.
Platts last assessed solvent-MX at $1,197/mt CFR China last Friday, up $30/mt from a week earlier.
Reflecting the tightness in the South China market, inventories of both isomer-MX and solvent-MX in the region tumbled 48% to 12,500 mt last Friday. By comparison, stocks in East China slid 28% to 32,500 mt.
Another key producer China Petroleum & Chemical Corp., or Sinopec, raised its ex-works prices of solvent-MX in South China by 1-1.1% with effect from Monday, while holding its East China prices steady at Yuan 9,200/mt since October 17.
