PX Price Hit a Five-Year High in H1, 2022
In the first half of 2022, PX prices kept climbing, with CFR China price hitting the highest point of $1,517/mt, a fresh high since 2018. The gains were mainly boosted by rising cost and tightened supply. In the second half of the year, both the supply and demand structure and cost support are expected to weaken. Therefore, it is difficult for PX prices to break through the high point in the first half of 2022.
In the first half of the year, PX prices showed an upward trend. Affected by the rise in crude oil and the recovery of oil blending demand, PX peaked twice in the first half of 2022, respectively in March and June 2022. The driving reasons behind the two price peaks are different. The main reason for the rise in March is the rise in oil prices. Both WTI and Brent oil broke through the $130/bbl mark, driving the prices of major PTA futures to rise by the limit for a time. PX prices reached $1,381/mt under the influence of upstream and downstream markets, forming a high price in the first quarter. Different from the rise in March, the rise in June was mainly due to tightened supply in Asia, which was driven by the continuous rise in crude oil and gasoline prices in the U.S., as well as the warmer demand for oil blending. Traders' short covering pushed up the PX market price, and the CFR price once hit $1,517/mt, breaking the five-year high.
The strong upward trend of PX price was also related to the tight supply and demand structure of China’s domestic PX market in the first half of the year.
From the perspective of supply, China’s domestic PX output in the first half of 2022 reached 11.3735 million mt, with a Y-O-Y increase of 10%. The increase in output was mainly due to the stable production of the newly added capacity (including 2# unit at Zhejiang Petrochemical Phase II Project, the 900kt/a PX unit at Sinopec Jiujiang Petrochemical and the expanded unit at Fujian Refining and Chemical), and the PX capacity base climbed to 32.71 million mt/a. At the same time, the growing profit was also a key factor to promote the growth of PX output. In addition, the restart of Hainan Refining and Chemical’s unit pushed up the overall operating rate of PX industry in the first half of 2022, further promoting the growth in PX output.
However, compared with the growth in China’s domestic output, the import of PX fell significantly. The PX import volume in the first half of 2022 is expected to reach 5,828.5 kt, down more than 14.86% Y-O-Y. The centralized maintenance of PX units in Asia, as well as the increase in oil blending demand led to a reduction in Asian PX supply, which is the reason why China’s PX imports slid and inventories continued to decline in the first half of 2022.
In terms of demand, China’s PX consumption increased by 4.03% Y-O-Y in the first half of 2022. The 3,300kt/a PTA unit at Zhejiang Yisheng New materials was put into operation at the end of January, which led to an increase in PTA production, thereby driving PX consumption up. Although the processing fee of PTA producers once fell to a negative value, making PTA enterprises carry out centralized maintenance, the growth rate of PTA output remained at about 2%, which still gave some support to PX demand, thus driving PX inventory to continue to fall.
To sum up, PX supply tightened in the first half of 2022. The sudden drop in import volume resulted in the continuous destocking of PX market. At the same time, the climb in crude oil prices led to a rise in PX prices. However, with the crude oil price falling back, the market reversed. The supply and demand structure and cost support will weaken in the second half of 2022. Therefore, it is estimated that it will be difficult for the PX price to break through the high point in the first half of the year.
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