In March, the domestic PX market prices rose significantly, with an average price of 7600 yuan/ton at the beginning of the month and 10200 yuan/ton at the end of the month, an increase of 34.21% and a year-on-year increase of 41.67%.
Double benefits for the PX market on both the cost and supply sides
1. Crude oil and naphtha skyrocket
The escalation of conflicts in the Middle East has hindered shipping in the Strait of Hormuz, causing a significant increase in the crude oil market. Asian naphtha prices have risen by over 60%, resulting in a strong increase in costs. In addition to the interruption of naphtha supply in the Middle East, refineries in South Korea, Japan, China and other countries have proactively reduced their production due to raw material shortages, resulting in a decline in PX operating rates and supply contraction from expectations to reality. Oman, Kuwait, Israel and other Middle Eastern PX facilities have been shut down due to conflicts, further tightening global supply.
2. Centralized maintenance of Asian refineries: supply side ‘adding insult to injury’
March to May is the traditional maintenance season for domestic petrochemicals. Zhejiang Petrochemical, Sinochem Quanzhou, Fujian United and other units have reduced their load, Ningbo Daxie unit has shut down, and the domestic PX operating rate has dropped below 85%. In addition, due to the centralized maintenance of Korean PX facilities such as S-OIL, SK, and Hanhua, as of late March, the operating load of PX in Asia has dropped to 83%, and in China it has dropped to 87%. The reduction in supply is favorable for the PX market.
3. Tight supply and demand pattern: accelerated destocking, supporting prices
PX inventory decreased for three consecutive weeks in March, indicating a strong bullish sentiment in the market. In addition, the downstream demand for PTA remains stable, and as a direct downstream of PX, PTA’s operating rate rebounded to 80% in March, forming a rigid demand for PX and widening the supply-demand gap, resulting in a significant increase in the PX market.
Market forecast: In the short term, the PX market is expected to experience strong fluctuations at high levels, with intensified volatility and a tendency to rise but not fall. The key factors to consider are whether the geopolitical conflict in the Middle East has eased and the recovery of shipping in the Strait of Hormuz; Progress of load reduction/maintenance and restoration of raw material supply in Asian refineries.