Europe paraxylene prices Asia

Viewpoint: Europe PX prices to align with Asia-Pacific Europe paraxylene prices Asia
Europe paraxylene prices Asia

European paraxylene (PX) spot prices will rise towards parity with those in the Asia-Pacific region in the first half of 2019, when a tighter European market will require imports from the Middle East. Europe paraxylene prices Asia

European demand is satisfied mainly through contract supply, pricing of which closely reflects Asia-Pacific levels; spot pricing has been at a discount.

Increased demand is likely to encourage producers to make more spot product available and this may move spot prices closer to contract levels.

The European PX market started to tighten in the second half of 2018 after the restart of Indorama’s 700,000 t/yr purified terephthalic acid (PTA) plant in Sines, Portugal.

The company expanded its Rotterdam plant to 700,000 t/yr from 380,000 t/yr in the third quarter of 2017. Europe paraxylene prices Asia

The restart of Indorama’s Portuguese plant led to an increase in European imports from Saudi Arabia, with more than 20,000 t/month imported in July to October, compared with no imports in the first half of the year.

Europe became a net importer of PX from the US in September, or 6,000t, after an average of 20,000 t/month went to the US in the first eight months of the year.

US product arrived in Portugal and Spain, and exports eased from the Amsterdam-Rotterdam-Antwerp (ARA) region. Europe paraxylene prices Asia

Increased imports are likely to continue in 2019, when a tighter European market will attract cargoes.

Product from the US and Saudi Arabia will head to Portugal and Spain; product from northwest Europe will head to the US, but in reduced volumes compared with the first half of 2018.

Isomerisation margins are likely to remain robust through the first half of 2019.

The PX-mixed xylene (MX) spread averaged $325/t so far in the fourth quarter 2018, compared with $272/t in the third quarter and just $125/t in the first half of the year.

This will encourage producers to take MX out of the gasoline pool for incremental PX production and to maximise operations on toluene disproportionation units.

Global polyester demand is likely to remain firm in 2019, with no new PTA capacity scheduled to start up.

PTA margins were poor in 2014-17, which discouraged investment, but margins more than doubled in 2018 and are likely to rise further in 2019.

The European PTA market is likely to better balance in the first half of 2019 as supply issues seen in the second half of 2018 get resolved.Europe paraxylene prices Asia

Planned maintenance at a 600,000 t/yr plant in Poland overran in the fourth quarter, leading to a drop-off in exports to western Europe.

Imports from Mexico stalled following a fire at Alpek’s 1mn t/yr unit in Altamira in mid-July.

The plant restarted in September, with imports from there steadily returning in the fourth quarter to the 17,000 t/month levels seen before the fire.

Western Europe will remain a net importer of PTA next year, but exports are likely to increase in the first half of the year.

Product from Portugal will continue to head to Egypt to supply Indorama and Dhunseri’s 540,000 t/yr polyethylene terephthalate (PET) joint venture.

Exports from Europe to Egypt have been steadily increasing through the second half of the year as the plant restarted — exports averaged 4,200 t/month in the third quarter and 7,500t in October.

Exports to Egypt in the first quarter are likely to be higher as the plant ramps up to full operating rates.

Product is also likely to flow to Lithuania to supply Neo Group’s PET unit in greater volumes, after it expanded to 500,000 t/yr from 308,000 t/yr in the middle of 2018.

Demand from the PET segment will remain seasonally weak in the first quarter, and pick up in the second quarter.

The logistical issues caused by low water levels on the Rhine river are likely to remain in effect through the first quarter.

Restrictions on barge loading capacity, in effect since June, have hindered barge movements.

Because European PX production is mostly on the coast, or adjacent to or close to PTA production sites, hindered barge movements from Gelsenkirchen and Wesseling lead to an overall reduction of PX available for export.

The low water levels led to a tightening of the inland European toluene market; some length built up along the coast.

Rhine-based producers cut production, including Shell from its 170,000 b/d Godorf and 140,000 b/d Wesseling refineries in late October —Shell’s 150,000 t/yr toluene diisocyanate (TDI)-grade plant at Wesseling was unable to load barges.

A recent rise in water levels has allowed producers to increase run rates.

Downstream cutbacks largely offset the production issues.

BASF stopped output at its 300,000 t/yr TDI unit at Ludwigshafen in late November because Rhine-related logistical bottlenecks affected transport of raw materials to the site.

A rise in water levels early in December allowed barges to travel past Kaub, helping to ease some supply issues, but it will take some time for logistics, raw material supply, inventories and production at Ludwigshafen to return to normal.

There is no scheduled restart date for the unit, as this will depend on a long-term recovery of Rhine water levels.Europe paraxylene prices Asia

Precipitation on the upper Rhine in Switzerland is more likely to fall as snow between now and March, and therefore will not contribute to water levels in the immediate term.

Demand for TDI-grade toluene is likely to increase in the second quarter when Rhine levels should return to normal, pushing up toluene pricing as TDI stocks rebuild.

Nitration grade toluene is likely to remain in oversupply, keeping prices close to blend values.

Demand for toluene from conversion units will remain mixed in 2019. Hydrodealkylation (HDA) economics have been firmly negative, with benzene prices falling below toluene towards the end of the fourth quarter. Europe paraxylene prices Asia

This has kept HDA units either idled or running at minimal levels. The benzene market is likely to remain weak in the first quarter of 2019, before picking up in the second quarter, but this is unlikely to move HDA margins into positive territory.

Disproportionation margins eased from 18-month high in October and are likely to remain in positive territory through the first half of 2019, supported by strong global PX pricing. Length in the by-product benzene market will likely limit rates in the first quarter.

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