Singapore—The Asian paraxylene price hit a 21-month high at $895.83/mt CFR Taiwan/China Feb. 25 on tight supply caused by multiple plant hiccups since the start of the year.
The marker has jumped $172.66/mt, or 23.9%, since the beginning of the month, and was last higher at $896.25/mt CFR Taiwan/China on May 27, 2019, S&P Global Platts data showed.With the upward pricing momentum for PX outpacing that of feedstock naphtha, the spread between the two widened to a 10-month high at $286.21/mt Feb. 25 -- a stark contrast from an average $150.66/mt seen in second-half last year. The PX-naphtha spread was last wider at $291.17/mt on April 13, 2020, Platts data showed.
PX prices began their uptrend from the fourth quarter of 2020, buoyed by rising upstream oil prices, and maintaining a rangebound spread to naphtha. Moving into January, a flip in supply-demand fundamentals due to a series of plant shutdowns, and reduced supply committed to term contracts due to lower expected production rates for the year, drove supply tighter and limited spot cargo availability.
The bullishness further intensified after trading resumed post the Lunar New Year holidays as an upward trajectory was observed across most oil and petrochemicals markets.
The severe winter storm in the US Gulf Coast in the week ended Feb. 20 that knocked multiple refiners and chemical producers offline led to tight paraxylene supply and higher prices globally. Prompt demand for Asian PX from the US also contributed to the market sentiment, sources said. Tighter paraxylene supply in the US may result in reduced supply in Asia, but the arbitrage has to widen for the flow of cargoes West, said a trader.
Nevertheless, this lent further support to sentiment in Asia and even globally, said another source.
Much as the market anticipated an improvement in paraxylene fundamentals in the first quarter, its performance thus far was "beyond expectation," a source said.
The uptrend led to a surprise settlement for the February Asia Contract Price for PX at $705/mt after negotiations ended without a major settlement for 16 straight months. The market is closely looking at negotiations for the March ACP that is expected to conclude by the end of Feb. 26. Producers' nominations were at $920-$1,020/mt CFR Asia, Platts reported earlier.
In the downstream purified terephthalic acid market, the most actively traded May contract on the Zhengzhou Commodity Exchange surged Yuan 234/mt, or 5.03%, day on day at Yuan 4,882/mt Feb. 25, extending its day-on-day increase in the week started Feb. 21. While PX prices and crude oil futures are likely to lead the trend in downstream PTA, the day-on-day jump has accelerated bullishness among PX market participants and kept trade momentum going, sources said.
There were some concerns the continuing rise in PX prices would suppress downstream Chinese demand amid the squeeze in PTA production margins on an Yuan basis.
Looking ahead, market participants were on a consensus that paraxylene fundamentals have improved from the previous year and the bullish sentiment is expected to continue for now. Another two new PTA plants expected in the first quarter would boost demand for paraxylene in an already tight market.
Sources added that the future PX price direction hinges on movements in related markets, the rate at which supply loss would return, and general macros like the COVID-19 vaccination rollouts globally.
(Corrects ACP nominations in 9th paragraph.)
