The spread between paraxylene and isomer-grade mixed xylenes has narrowed to its lowest level in 20 months Monday, amid a weak PX market, sources said Tuesday.
On Monday, the spread was pegged at $185/mt, down $2.5/mt from last Friday, and the lowest since October 13, 2010, when it was pegged at $175/mt. Early Tuesday, the spread dropped further and was hovering at $169/mt.
The spread had strengthened late last year, driven by a firm PX market amid rising demand from China ahead of downstream purified terephthalic acid plants starting up in the country.
But the Asian PX market started to slow down from May this year, hit by delays in some PTA plant startups. Early Tuesday, Asian PX fell $16/mt from Monday's close and was pegged at $1,186/mt FOB Korea and $1,209/mt CFR Taiwan/China.
On the other hand, the Asian iso-MX market was pegged at $1,030/mt FOB Korea and $1,040/mt CFR Taiwan early Tuesday, unchanged from Monday's Asian market close. The shut US-Asia isomer-MX arbitrage window, and tight supply of the product has been supporting MX prices in Asia.
"PX is affected mainly from downstream polyester chain while MX is physically tight," said a trader. "[Moreover], MX producers are not in a hurry to sell MX at low prices with the current PX-MX spread," the trader added.
In the US, MX prices rose by 5 cents/gal from last Friday to 400 cents/gal ($1,216/mt) FOB US Gulf with the spread between the US and Asia isomer-MX at $176/mt Monday, up from $170.30/mt last Friday.
Based on Monday's prices, US MX will cost about $1,266/mt in Asia -- after taking into account freight of $50/mt -- $226/mt higher than the current Asian isomer-MX price.
The US-Asia MX arbitrage hs been shut since mid-March, and the reverse arbitrage -- from Asia to US -- opened on paper mid-May. As Asia is typically a net importer of isomer-MX with its main supply coming from the US, the opened reverse arbitrage has ensured supply of isomer-MX from the US will continue to be restricted in the coming weeks.
In addition, the firm blending value of isomer-MX in both the US and Asia has resulted in refineries preferring to leave the product in the gasoline pool, further tightening MX supply and boosting prices.
"In Japan, the blending value of MX is higher than the current MX price, thus, the producers do not wish to produce MX [to sell in the market]," said an Asian trader.
The Asian isomer-MX market has also been attracting Western traders lately, seeking to secure isomer-MX cargoes either to fulfill term contracts with Asian buyers or exploring the possibility of shipping isomer-MX cargoes to the US.
After the close of business on Monday, Kolmar bought an H1 July MX cargo from Interchem at $1,055/mt FOB Korea. Other US traders were also heard seeking MX cargoes in the Asian spot market.
