PX inventory to reduce during plant turnaround peak

After the Lunar New Year holiday, the focus in PX market has returned onto the upcoming turnaround season as well as expectation for gasoline blending demand.

As of the time of the writing, there's increasing number of PX plants that would undergo maintenance in and outside China during the traditional turnaround season in Mar-Jun.

Based on the turnaround schedule, Asian PX plant (incl. China) operating rate is estimated to maintain high in Mar, with average level at 77-80%. Beginning from Apr, however, it could drop obviously in Apr and hit low point in end-Apr or early May around 70%. Then, it is expected to recover gradually to 77% in end-Jun or Jul.

In the chart above, the red line shows the forecast for PX plant operating rate for 2024. It can be seen PX plant operating rate would drop during turnaround season, but it could still be much higher than the level during the same period of 2022 and 2023. In the forest, the turnaround of ZPC and Zhongjin Petrochemical is considered, but if the two plants do not undergo maintenance as expected, the low point of average PX plant operating rate may be higher than the current forecast.

PX economics are currently good, incentivizing plant operations, especially when aromatics such as benzene price is strong. Supported by strong fundamentals, benzene price has been resilient and exceeded that of PX again in Feb, which leads to TDP margin hovering the high in more than one year.

However, it is noteworthy that gasoline blending demand would bring about increasing impact on the market. US gasoline to crude oil price spread exceeded $20/bbl in early Feb, and then widened rapidly to the current level of slightly above $30/bbl.

The arbitrage window for aromatics from Asia to the US has been widening. Except for PX, the price spread of US to Asian toluene, mixed xylenes and benzene have exceeded $200/mt theoretically, indicating open arbitrage window for aromatics from Asia to US.

Data showed South Korea exported benzene and toluene to US market during Feb 1-20, but MX and PX exports to US were minor. However, market source said some large volume of MX and toluene would be shipped from South Korea to US in end-Feb. If the export volume is at the normal level in previous years, the upward momentum for the Asian market may be limited. After all, gasoline blending demand and exports to the US are already in the market's expectations. Especially at present, gasoline inventory in the US is at relatively high level.

In a conclusion, PX supply and demand situation is anticipated to improve, with inventory expected to rise in Mar, but decreasing in Apr and May, but it could still be dependent on whether there's uncertainty in PTA plant operations, and whether there's unexpected PX plant operating rate cut outside China due to gasoline blending demand.

Considering that PX inventory had increased by a combined 800~900kt since the last quarter of 2023, the reduction in this Apr and May of more than 200kt would be relatively small, and long PX supply availability would continue. PX could be in the lack of advancing momentum, unless producers step up plant turnarounds or plant operating rate further drops due to strengthening of aromatics prices.