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Analysts have recently widely predicted that seasonal demand for gasoline will recover in 2023, and the Asian paraxylene (PX) market is likely to be driven by the increase in supply from Northeast Asia and arbitrage in North America, which will bring volatility
to the market.
In addition, the demand for PX from the polyester supply chain in Asia is difficult to determine, and the Asian PX market will be further surplus in the context of more PX capacity coming on stream in 2023, bringing more uncertainty
to the global PX market.
At present, the fourth quarter of 2022 has just ended, and the statistical work of major analytical agencies has not yet been completed
.
Previously, the agencies expected 5.
6 million tons of new PX supply in Northeast Asia in 2022 and another 6.
2 million tons of PX capacity
in Northeast Asia in 2023.
PX capacity expansion in Northeast Asia will further reduce reliance
on PX imports from outside the region.
In the context of regional capacity expansion, the operating rate of Asian PX producers is expected to remain low and profit margins will be squeezed
, analysts said.
Plants with less competitive production costs may be forced to cut production or close for long periods of time and rationalize
capacity.
Manufacturers also expect a reduction in PX contract volumes in 2023 and more companies looking forward to spot market opportunities
.
At present, discussions of 2023 PX fixed-term contracts have been affected, and January PX shipments have been transferred to the spot market
without fixed-term contracts.
Another significant change is that some companies will no longer use the Asian Contract Price (ACP) settlement mechanism for PX fixed-term contracts in 2023, and other market participants are expected to follow
.
Over time, the ACP contract price lost its relevance to the current state of the market, with few monthly bills and far between
.
Some market sources expect the spot premium in the PX market to continue into 2023, but the tight supply may be offset by weak demand, and even weaken the PX-naphtha
.
The spread between China's PX and Japan's naphtha rose to a record high
of $684.
83/mt on July 28, 2022, driven by the opening of the Asian and US arbitrage window and strong demand for gasoline blending components.
In the first three quarters of 2022, the spread averaged $324.
50/mt
.
But market sources expect that spread to weaken
in 2023.
While some market participants believe that North American gasoline blending demand in 2023 will again boost Asian aromatics, others believe that PX's lucrative 2022 NAPHTHA situation may not be repeated
due to the gloomy outlook for polyester demand.
Overall, the Asian PX market is highly uncertain.
From the downstream market, market participants have expressed concern
about the production and market situation of terephthalic acid (PTA) in Northeast Asia due to capacity expansion and operating losses.
According to sources, although PX demand is expected to increase in 2023 due to downstream expansion, negative profit margins may bring negative feedback to the upstream market, which in turn will affect PX prices
, due to oversupply and concerns about global demand.
In addition, exporters in Northeast Asia face competitive pressure, as supply growth will lead to more competitive offers
from some producers in the region.
As a result, weak demand and low operating rates can lead to low production margins
.
PTA producers in Northeast Asia will also join spot
trade flows exporting to the United States.
In other regions, European PX market fundamentals will remain challenging
in the first half of 2023.
Supply in the upstream mixed xylene (MX) market and downstream demand for polyethylene terephthalate (PET) will both affect pricing
.
Spot PX market activity will be constrained until at least the first quarter, with PET buyers and sellers continuing to reduce inventories
amid sluggish demand for PET bottle grades and sheets.
In early 2023, the low load operation of PET production is likely to put further downward pressure on PX prices in Europe, although lower MX production may cushion it
.
This uncertainty in fundamentals and pricing will affect contract negotiations, and market participants may exit or shelve negotiations
.
As in the Asian market, sources remain uncertain about the European PX market in 2023
.
A European trader said: "The PX market is unusually quiet and is expected to remain that way
.
The PX market in 2023 is hard to tell
.
”