Asian PX price nosedives to below $900/mt

By the closing trading hours on Sep 2, CFR China PX price has nosedived to assess at $893/mt, down $38/mt on day, hitting the new low since Dec 2021 and recording the biggest daily drop since May 2023.

The main driver and logic behind the continuous price drop in PX since Aug has been mentioned in earlier reports on CCFGroup's website.

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Then, what happened on Sep 2?

Firstly, PMI was sluggish and commodity index was weak. During last weekend, the Aug official manufacturing PMI was released at 49.1%, down 0.3 percentage point from the month earlier, indicating the contraction of manufacturing sector. PMI is taken as the barometer to economic growth, playing a pivotal role in supervising, forecasting and waning the economic activities. Currently, the PMI below 50%, and it has been in contraction territory for the fourth consecutive month and hits new low in one and a half year, dealing a severe blow to market sentiment.

After the release of PMI which is lower than expected, China commodity futures market declined sharply on Sep 2 in tandem. Wenhua Commodity index slumped as well, by a whopping 2.09% throughout the day, recording the biggest daily drop in more than one year. Commodity market confidence was crippled amid the sluggish economic backdrop, which dragged down PX and PTA prices.

Wenhua Commodity Index

Secondly, crude oil declined again and the cost collapsed. Besides from the commodity futures, PX was also weighed lower by the drop in crude oil. On Aug 30, there was news that OPEC+ planned to raise production beginning from October as scheduled, as supply disruptions in Libya and some member countries' reducing output could cushion the impact of excess production on weak demand. Eight OPEC+ members planned to increase production by 180,000 barrels per day in October.

This news led to a sharp decline in crude oil prices during last Friday's trading session, with WTI crude futures closing down $2.36/bbl and Brent crude futures down $1.14/bbl. On Monday morning, Asian naphtha price tracked the decline, and the discussion levels for PX moved down in tandem.

Main contract of Brent crude oil futures

In addition, data showed South Korea exported up to 510kt of PX in Aug, in which about 430kt went to Chinese mainland which was 14-month high. Though the rise in China's PX imports was in line with expectation, it still exacerbated the bearish sentiment and caused further drop in PX price.

In a conclusion, PX price was hit by sluggish macro economic and commodity market, as well as the fall in crude oil. In the lack of support from fundamentals, PX price kept moving lower.