The price spread between Asian paraxylene and isomer-grade mixed xylenes on an FOB Korea basis narrowed $2/mt from Tuesday to a more than three-year low of $154.50/mt Wednesday, with MX staying relatively supported while PX and downstream purified terephtalic acid markets languished, Platts data showed.
The spread was last lower on October 11, 2010 at $143.50/mt, Platts data showed.
The spread, however, firmed Thursday widening to $168.50/mt as isomer-MX jumped $6/mt day on day to $1,142.50/mt FOB Korea and PX soared $20/mt to $1,311/mt FOB Korea Thursday. There was short-covering for March cargoes in the Asian PX market Thursday which led to the price surge, said sources.
On Wednesday, isomer-MX on an FOB Korea basis was assessed at $1,136.50/mt, up $2/mt day on day, while PX on an FOB Korea basis had remained unchanged day on day at $1,291/mt.
Since January 2, the isomer-MX marker has dropped by 18.50%, while PX fallen by 21% over the same period.
The main factor pulling down the Asian PX market was sluggish downstream PTA, which has been falling since third quarter of 2013 from $1,075/mt CFR China assessed September 2 to $954/mt CFR China on Wednesday, data showed.
"PTA demand [is not likely to recover] anytime soon, and the PET demand also may not increase until peak summer demand season. So, PX prices are not likely to be supported," a market source said.
Sluggish PTA demand is partly due to overcapacity in China, with new PTA plants starting up in the country since the third quarter of 2013. According to market sources, a total 19 million mt/year of new PTA capacity will be added by the second quarter of 2015 in China.
On the other hand, the isomer-MX market remained well supported amid a closed arbitrage to send MX from the US into Asia and supply shortage in Asia, market sources said.
The US-Asia isomer-MX arbitrage has been shut on and off since August last year. It was last shut on paper on January 17, with the isomer-MX spread between CFR Taiwan and FOB US Gulf Coast at $76.70/mt then. For the arbitrage economics to work, the Asia-US spread must be above $85/mt, based on a discounted term charter freight rate from the Gulf Coast to South Korea or Taiwan. Spot freight rates for these routes are currently at $95/mt for a 5,000-mt BTX cargo, according to Platts data.
Asia is also seen to be net short of MX, said sources. In October last year, the Korea Petrochemical Industry Association estimated that isomer-MX production would fall 785,000 mt/year short of demand in 2013 and 1.9 million mt/year short of requirements in 2014.
Meanwhile, toluene -- which is sometimes used as feedstock to produce MX -- has been rising as well keeping MX firm in Asia. The price spread between isomer-MX and toluene on an FOB Korea basis has been narrowing since the third quarter of 2013 -- it was assessed at $158.50/mt on September 2 but has since then narrowed to at $19/mt Wednesday.
The isomer-MX/toluene spread typically ranges at around $50-100/mt, according to market sources.
"Currently, Asian isomer-MX seems to be relatively overvalued against PX and PTA, but undervalued against toluene and solvent-MX," a trader based in Seoul said.
