PX more affected by refined oil products

During China’s Dragon Boat Festival from Jun 3 to Jun 5, Asian PX price spiked again. It advanced sharply by $71/mt to $1341/mt CFR China/Taiwan on Jun 3. PXN spread widened in tandem to new high since Apr 2019.

The driving force to PX market remained unchanged, from robust refined oil products market. On Jun 3, US gasoline futures refreshed record high again, to $4.3260/gal.

The rise in refined oil products continued pushing up prices of blending components. The price spread of toluene and MX in the US and Europe to Asian toluene and MX kept widening, leading to sharp increase in Asian toluene and MX prices.

Since Jun 1, FOB Korea MX price has hiked above FOB Korea PX price. Under this circumstance, some participants showed concerns about PX producers’ intention to cut PX production and instead sell MX, which could lead to further tightening of PX supply.

However, currently, large-scale PX production cuts or plant shutdown has not taken place. Whether there will be intensive cuts needs to be seen.

On Jun 3, China PTA futures market was closed for holiday, and some producers were on a holiday, which could also be a reason for the spike in PX price last Friday.

Currently, PX market shows two changes. Firstly, China domestic PX plant operating rate rises gradually, and some PTA plants are said to have received notice that PX producers would increase PX supplies.

Secondly, South Korea’s PX exports remain low. According to some source, the exports reached about 410kt in May, down 4% from a month earlier. The export volume to US and Brazil totaled 49kt, up 41%; while that to Chinese mainland was 290kt, down 18% on month. It reflected that South Korea continued exporting PX to Americas, while the data would be dependent on official announcement.

In a conclusion, with refined oil products staying strong and Asia to US and Europe arbitrage window open for toluene and MX, refined oil products are playing an increasingly important role in PX pricing.