Asian PX-naphtha price spread squeezes to below $300/mt

From the beginning of Aug, Asian PX-naphtha price spread snapped the uptrend, and has been heading south since then. As of Aug 13, the spread has squeezed to this year's low point of $292.5/mt. But it is different from the case in the first half year when the spread temporarily narrowed to below $300/mt.

In early Mar, PX-naphtha price spread narrowed to $292.5/mt, which was mainly attributed to rise in naphtha price. At that time, PX price tracked the decline in crude oil, while naphtha price was driven up by geopolitical conflicts. Some refineries in Russia got attacked by drones, and thus its naphtha exports were restricted. Buyers from Asia entered to buy amid concerns about supply disruptions. As a result, naphtha price was pushed up while PX-naphtha spread got squeezed sharply.

During this round of squeeze, the decline in PX price is the main cause. In early Aug, naphtha and PX prices dropped in line with crude oil, but then, naphtha tracks the rebound in crude oil but PX price keeps falling persistently.

Firstly, PX plant operating rate hovers high and supply is ample. With plants completing maintenance and getting restarted, China PX plant operating rate has been rebounding since Jul, to high point of 86%. Outside China, Reliance raised PX operating rate; GS, ENEOS and Rabigh restarted their PX units; and S-Oil restarted its plant after hit by fire. Therefore, overseas PX supply has also increased.

In the near future, Sinopec Jinling, FCFC, ENEOS and Hengyi Brunei are poised to either ramp up operating rate or restart their plants. PX operating rate is expected to sustain high before the turnarounds in autumn. Under this circumstance, suppliers from Southeast Asia are seeking outlets and sellers from Middle East are also looking for opportunities in exporting PX to Asian market.

Secondly, some large suppliers are active in selling, while buying sentiment softens.

There's some change in PX trading amid ample supply. Some PTA plant turned to selling PX in the first half of Aug, and its selling volume of PX in Aug only has reached its volume in the first half year. It exacerbated the pressure on PX price. In addition, overseas traders did not stay firm to support the price. It was difficult for PX price to find support from trading operations.

PX plant operating rate maintains high, and downstream PTA plants keep buying with stable demand. However, PX price could barely get supported under current supply and demand situation.