PX lacks advancing momentum in spite of plant disruptions

PX-naphtha spread widens slightly recently, from the low point of $130/mt in end-Oct to current level above $150/mt.

In terms of plant operation, as PX-naphtha spread has been hovering low, some unexpected disruptions in plant operation have occurred in Nov, either because of poor economics or technical issues. Meanwhile, Zhejiang Petroleum & Chemical raises PX operating rate more slowly than expected.

As a result, PX plant operating rates both in and outside China have dropped in Nov. PX output is expected to reduce in Nov to an estimated 1.75 million tons in China.

Though PTA margin is also low, the plant operating rate still stays around 78% and may tick up further. Therefore, China PX supply and demand may improve in Nov, and the inventory is expected to shed by 150kt in China.

In Dec, China domestic PX output is expected to increase with ZPC to raise operating rate. Meanwhile, some PTA plants would undergo maintenance and some could cut production unexpectedly due to poor economics. China PX inventory may decrease fractionally or the supply and demand may turn balanced in Dec.

Moreover, the squeeze in naphtha-crude oil spread recently also supports PX-naphtha spread to widen.

However, as feedstock naphtha remains strong, and thus it would take time for PX margin to improve with through the squeeze of naphtha-crude spread.

In a conclusion, with drop in PX plant operating rate due to poor economics, PX-naphtha spread widened with inventory reducing and PX got supported by firm cost. However, crude oil corrects, naphtha keeps strong while downstream polyester market is lukewarm, and PX is lack of advancing momentum with ZPC expected to raise operating rate.