China PX Market Semi-Annual Analysis
In the first half of the year, the PX market showed a consolidated trend, supported by firm crude oil prices and strong demand. In the second half of the year, with the expected improvement in the crude oil market and the addition of multiple new PTA projects, the pressure on PX inventory may slow down. After breaking through the $1,000/mt threshold, the PX price is expected to further climb in the second half of the year. However, considering the high processing costs of PX and concerns about the polyester demand, the price increase of PX is expected to be limited.
The domestic PX market trend in the first half of the year was consistent with our prediction in the 2022-2023 China PX Market Annual Report. Due to the active reduction of oil production by major oil-producing countries and the strengthening of economic recovery expectations, the crude oil market was strong, which boosted PX prices. Additionally, the supply contraction was greater than anticipated due to the heavy maintenance in the second quarter as well as the slowly developing additional capacity at Sinopec Guangdong Petrochemical and Ningbo Daxie Petrochemical. PX prices as a result increased quickly in April and passed $1,150/mt.
From January to June 2023 (as of June 29), the average price of PX was $1032.44/mt CFR China, a decrease of 11.82% compared to the same period last year. On June 29, the CFR China PX price closed at $965/mt, an increase of 1.47% compared to the beginning of the year.
The highest price of PX in the first half of 2023 occurred in mid-April, with prices reaching $1,153/mt. On the one hand, under the multiple positive factors such as the Federal Reserve slowing down interest rate hikes and multi-country joint production cuts, international crude oil prices rose strongly, thereby providing effective cost support to the PX market. On the other hand, routine maintenance plans for numerous units in China have been carried out one after another, while the operating rate of the newly added project at Ningbo Daxie Petrochemical was only 20-30% after mass production, leading to an exacerbation of supply shortage. In addition, ACP was achieved for the first time in 7 months, and Sinopec raised its listing price to RMB 9,100/mt in the middle of April, enhancing market confidence. Therefore, PX prices significantly increased. The price of PX fell in late April as a result of the fall in crude oil. Due to the regular unanticipated production reduction and closures at PTA factories, PX prices dropped back to the $950/mt level. Nevertheless, the PX price has not yet fallen below the year-low of $942/mt on January 4, 2023.
The feedstock prices showed a rising trend, which fueled the PX cost.
Crude oil, as a direct upstream feedstock of PX in integrated refining and chemical complex, has a crucial impact on PX cost. The correlation coefficient between crude oil and PX in 2022 reached as high as 0.8921, and the correlation coefficient between MX and PX reached 0.9748. In the first half of 2023, crude oil and MX both showed a relatively strong trend, which to some extent supported the PX market.
In the first half of the year, international crude oil prices fluctuated widely, with the price center shifting downwards. The continued interest rate hikes by the Federal Reserve led to a strengthening US dollar, which pressured crude oil prices. In addition, the Federal Reserve’s interest rate hike triggered the U.S. banking crisis and once extended to Europe, resulting in increased risk aversion in the market. Affected by the U.S. debt crisis, crude oil prices fell significantly in March and May. In June, the OPEC+ meeting decided to extend the production reduction measures until the end of 2024, and Saudi Arabia reduced production by an additional 1 million barrels, leading to a pulse-like rebound in international oil prices, providing phased support to the PX market.
In the first half of the year, xylene prices in Asia declined after rising. The overall xylene supply in Asia was relatively tight amid intensive unit maintenance. At the beginning of the year, due to the rise in international oil prices and increased demand from China and India, the xylene market negotiation atmosphere was moderate. In addition, demand from the U.S. was also ahead of previous years, driving up xylene market prices. However, the bank and debt crises in the U.S. led to a broad decline in international oil prices, and expectations for demand during the US tourism season were not fulfilled, resulting in limited growth in Asian xylene prices.
PX supply increased less than expected, while PX demand grew notably.
In 2023, the Chinese PX supply continued to expand. In the first half of the year, the 650kt/a PX unit at Sinopec Zhenhai Refining & Chemical was expanded to 800kt/a, the 2,000kt/a PX unit at Shenghong Petrochemical, the 2,600kt/a unit at Sinopec Guangdong Petrochemical, the 1,600kt/a unit at CNOOC Ningbo Daxie Petrochemical, and the 1,500kt/a PX unit at CNOOC Huizhou Petrochemical were successively put into operation. The PX output from January to June reached 15,281.6kt, an increase of 34.40% compared to the same period last year. In addition, the import volume of PX from January to June was 4,583.3kt, a decrease of 20.17% compared to the same period last year. The total supply reached 19,864.9kt, an increase of 16.09% Y-O-Y.
In terms of demand, the downstream consumption of PX in China totaled 19,433.58kt in H1 of 2023, up 8.70% Y-O-Y, with no PX exports. The downstream PTA industry is still at the peak of capacity expansion, with a total new capacity of up to 10 million mt/a in the first half of the year. New production lines at Dongying Weilian Petrochemical, Jiangsu Jiatong Energy, and Hengli Petrochemical (Huizhou) have been put into operation, significantly increasing the domestic demand for PX. In the context of China’s economic recovery, the demand has warmed up from downstream industries to upstream industries.
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