2022 China PX market review

In 2022, PX market was better than expected.

 

1. Price

PX price averaged $1103/mt CFR China in 2022, up 28% on annual basis and hitting 5-year high. The price hit its low point of $890/mt CFR on Dec 7, and high point of $1513/mt CFR on Jun 8, new high since Sep 2013.

 

 

PX price moved up, with driving force from Russia-Ukraine conflict, rising cost due to high inflation, tight feedstock supply due to good demand for refined oil products, and delay of new plants.

 

2. Processing spread

PX-naphtha price spread averaged $317.8/mt on CFR basis throughout 2022, up 49.3% on annual basis and hitting new high since 2020. The spread hit its low point of $142/mt on Mar 7, and high point of $685/mt on Jun 8, new high since Sep 3 2018.

 

However, PX-MX spread remained low in 2022. The annual average level was only $60/mt on FOB Korea basis in 2022, hitting record low. It hit low point of -$56/mt and high point of $132/mt within the year.

 

 

PX-naphtha spread widened, on the back of tight PX supply and price resilience, as well as negative profit in naphtha due to poor economics of olefins and attractive profits in refined oil products.

 

As for MX, the supply structure of global refined oil altered heavily due to Russia-Ukraine conflict. Demand for refined oil picked up, especially for gasoline in US market. With increasing demand for blending components with high octane number, MX and toluene prices were driven up notably. MX and toluene cargoes were exported from Asia to the US, and therefore, the profits in PX based on MX were squeezed sharply, even to negative territory.

 

3. Plant operations

Chinese mainland and Asian (including Middle East) PX plant operating rates both dropped in 2022 compared to the year earlier, down by 4 and 5 percentage points respectively. Firstly, the incentive to plant operations was curbed to some extent due to poor economics for several years. Secondly and more importantly, demand for refined oil was good outside China, and thus PX profit was squeezed by rising MX and toluene prices. Some plants turned to selling MX and toluene while cutting PX plant operating rates.

 

 

In Chinese market, however, due to COVID restrictions in 2022, consumption of refined oil was suppressed, leading to high inventory. In addition, weak economics for refineries also impacted the operating rates of PX. China domestic MX and toluene were also strong on some periods, capping the operating rates of PX plants.

 

4. Imports and exports

In Jan-Nov 2022, Chinese mainland imported 9.78 million tons of PX, down a whopping 22% on year. The monthly imports were as low as 615kt in Jul, new low since Dec 2012. Low plant operating rate outside China with reduced production, and some materials being diverted to US led to lower-than-expected imports of China. In addition, increase in domestic production substituted some imports.

 

 

In the first 11 months of 2022, China PX exports reached 80kt, new high since 2016. Some materials were exported to neighboring countries, due to strong demand outside China, and the opening of arbitrage from Asia to US.

 

5. Supply and demand

The large drop in imports combined with low plant operating rate in China and delay of new plants resulted in China PX supply lower than expected. On demand side, PTA production kept growing, supported by the exports, despite slow growth in polyester consumption. China PX inventory decreased for much of the year.

 

 

In a conclusion, PX market was impacted by Russia-Ukraine conflict, increasing demand for refined oil, delay of new plants, as well as unexpected disruptions of old plants. PX profits recovered some losses in 2022.