South Korea's HC Petrochem plans to further cut runs at its No 2 aromatics plant at Daesan to 70% from early next week, due to weak production margins for paraxylene, a company official said Thursday.
"Operating at 70% capacity is the lowest level mechanically. We have no choice but to cut runs further as improvement of the PX-MX spread seems unlikely in short term," he said.
The No. 2 aromatics unit has been operating at 80% of capacity since August 12, following an initial cut from 100% to 90% on August 1.
The No. 2 aromatics plant, which began commercial operations January 8, is able to produce 800,000 mt/year of PX and 120,000 mt/year of benzene.
For HC Petrochem to break even, the PX/isomer-MX spread must be $250/mt, the official said, slightly higher than the typical breakeven level of $230/mt for other unintegrated PX producers.
The PX/isomer-MX spread on a CFR Taiwan basis was last assessed Thursday at $195/mt, according to Platts data, after falling to an 11-month low of $189.50/mt on July 24.
HC Petrochem, which typically buys 80,000 mt/month of isomer-MX via term contracts, will only take delivery of 65,000 mt of the feedstock in September due to the run cuts, the source said.
"If the poor PX-MX spread continues going forward, we would likely cancel the term buying isomer-MX further, then sell [the remaining] isomer-MX to the spot market and buy PX from the market to offer to our buyers," the source said. "We are even mulling over shutting the No. 2 unit."
The company has six term suppliers for isomer-MX, with Japan's Cosmo Oil accounting for 70% or 56,000 mt/month of the volume. HC Petrochem is a 50:50 joint venture between South Korea's Hyundai Oilbank and Cosmo Oil.
