Asian isomer-grade mixed xylene spot prices have slumped around 8% since reaching record highs of $1,427.50/mt FOB Korea and $1,446.50/mt CFR Taiwan on January 7, Platts data showed.
On Wednesday, the mixed xylene was assessed at $1,316/mt FOB Korea, down $111.50/mt, or 7.8%, seven trading days after hitting an all-time high and also down $7/mt day on day. On a CFR Taiwan basis, MX has slumped $120.50/mt or 8.3% since the January 7 peak and was also down $17/mt from Tuesday.
Traders said the MX market was oversupplied, despite earlier predictions that Asia would be short due to the planned Q1 startups of two paraxylene plants -- HC Petrochem's 800,000 mt/year unit in South Korea which came online earlier this month and Tenglong Aromatics' upcoming 1.6 million mt/year plant in China.
Both plants would require at least 1.6 million mt/year of feedstock MX to operate if run at full capacity, market sources have said. The conversion factor for MX to PX is 1:1, but Tenglong's PX plant is able to use a combination of MX, condensate and naphtha as feedstock.
"It's the same story every year -- overly prepared," said a trader, pointing to the glut of cargoes in Asia now. Anticipating that Asia would be short of MX in 2013, traders had done their best to secure US cargoes in Q4 2012. South Korea imported 45,222 mt of US MX in December, up 54.8% from November, according to data from Korean Customs Service.
The delayed startup of Tenglong's PX plant from Q1 to Q2 was also cited as another factor for the long MX supply.
"Even Chinese traders are offering their MX," said a South Korean trader. China rarely exports MX because sellers have to absorb a 17% value added tax on the shipments.
Desperate to relieve themselves of the excess MX, some traders have turned to Southeast Asian PX producers to turn their MX to PX, a much more lucrative commodity at the moment, under tolling agreements.
Tolling fees -- the amount paid by MX sellers to have the feedstock turned into PX and returned to them -- is typically around $230-240/mt, but was quoted at $300/mt Thursday morning, one trader said. "That means there'll be nothing left for the MX trader at the end of the day," he said.
The PX-MX spread stood at $331/mt on Wednesday, with PX assessed at $1,657/mt CFR Taiwan/China and MX at $1,326/mt CFR Taiwan.
Other telling signs of the MX glut are the increasing rolling fees charged by South Korean producers and the widening contango in the physical market.
Traders who have bought MX but do not want to lift the cargoes have to pay a rolling fee to producers to keep the MX in the tanks. The November/December rolling fee was $10/mt in South Korea, but has doubled to $20/mt for January/February.
Meanwhile, according to Platts data, the January/February contango in both the FOB Korea and CFR Taiwan MX markets widened to $13/mt on Wednesday, compared with $6/mt on January 7, an indication that the prompt market is weaker than the forward one.
A South Korean PX maker said that $10/mt was a typical level for rolling fees, but noted that "with so much MX in the market now and tanks filling up, producers are charging more."
He added that with more MX offers coming from Europe and China for cargoes to be delivered in February and March, the rolling fee for February/March could stay at $20/mt.
