Taiwan's Formosa Chemical and Fiber Corp is maintaining run rates at its three aromatics plants at 90-100% of capacity despite paraxylene production margins remaining poor, a company source said last Friday.
The price spread between Asian PX and its feedstock isomer-grade mixed xylene shrank $7/mt day on day to a one-year low of $174.50/mt on a CFR basis last Friday as PX prices turned top heavy while MX remained bullish, Platts data showed.
FCFC's No. 1 line can produce 185,000 mt/year of PX, and its No. 2 and No. 3 lines 580,000 mt/year and 685,000 mt/year, respectively.
The source did not indicate why FCFC was maintaining its high production rates given the weak margin, other than to say it was a management decision.
Market sources said it was possibly due to the company having a large isomer-MX storage capacity, which meant it may have ample feedstock on hand that was purchased earlier at lower prices, making its current production margin wider than prevailing rates.
Another PX producer in Taiwan, CPC, plans to restart its No. 2 aromatics plant at Linyuan in southern Taiwan, on September 20, a source said Monday. That unit, which can produce 220,000 mt/year of PX, has been shut since August due to thin PX production margins.
"The operating period depends on the PX-MX spread, but currently we plan to run for 20 days or so," the source said.
CPC has two other PX plants at Linyuan, which have both remained shut since early this year, according to a market source. The No. 1 unit can make 220,000 mt/year of PX and No. 3 plant 250,000 mt/year.
The company has also flipped from being a regular isomer-MX buyer to seller this year, having offered up to 36,000 mt to date via five to six tenders. But for September, it sold only 5,000 mt, about half the volume it offered in the earlier tenders, in anticipation of the restart. US-ASIA ARBITRAGE SHUT ON PAPER
"Formosa keeping operating rates high and the restart of the PX plant by CPC will likely support the CFR Taiwan basis isomer-MX market firmly amid the poor PX-MX spread, in tandem with a lower-than-expected number of US-Asia isomer-MX arbitrage cargoes arriving over September-October," a trader said.
The US-Asia isomer-MX arbitrage shut on paper August 13, after being open for about a month, as US prices rose. Around 15,000-20,000 mt of US MX will likely be arriving to Asia over the next two months, according to market sources. Earlier, the volume had been anticipated at around 40,000 mt. "On the other hand, the isomer-MX FOB Korea basis market could ease, with PX producers in South Korea cutting rates recently, which will in turn widen the location spread between FOB Korea and CFR Taiwan markers," he added.
South Korea's HC Petrochem will cut runs at its No. 2 aromatics plant at Daesan to 70% of capacity from this week due to weak production margins for PX, a company official said last Thursday.
South Korea's Lotte Chemical shut its No. 1 aromatics unit at Ulsan August 4 due to weak PX production margins. The unit, which can produce 250,000 mt/year of PX and 90,000 mt/year of orthoxylene, is likely to be shut for at least a month.
But another trader said: "South Korean PX producers cutting run rates will ease the tightness in the CFR Taiwan basis market, as Korea-origin isomer-MX that is unsold will likely be offered to Taiwanese buyers, and deepsea cargoes will also likely head to Taiwan instead of Korea."
"In turn, the location spread is likely to narrow," he added.
