PX price driven higher by surge in gasoline price

Since the first week of Jan, prices of gasoline, as well as blending components including toluene and MX have surged in China.

As of Jan 10, coastal toluene price was assessed at 6,450yuan/mt, up 420yuan/mt on Dec 31, and that of MX at 6,630yuan/mt, up 450yuan/mt over the same period. And Shandong toluene price advanced by 455yuan/mt from Dec 31 to 6,355yuan/mt and Jan 10, and MX price gained 445yuan/mt to 6,485yuan/mt. Gasoline prices from independent refineries in Shandong have gained 276yuan/mt from Dec 31 to Jan 8. The price has been rising even since mid-Nov 2024.

Firstly, from Jan 1 2025, the import tariff rate on fuel oil will be increased from the original 1% to 3%. Fuel oil, as an important raw material supplement to independent refineries, is usually mixed with crude oil, and then input into CDUs or used as raw material for secondary units. The tariff increase will directly affect the refinery's raw material procurement costs. It is expected that the import cost will increase by about 80yuan per ton.

Secondly, in the middle of last week, a document on the upgrade of the management requirements of ships involved in sanctions in Shandong ports came out. Shandong ports banned the berthing of ships sanctioned by the United States. The U.S. Treasury Department has further strengthened crude oil-related sanctions against Iran, Russia and other countries. Affected by this, oil prices rose sharply on Friday. Shandong local refineries also raised the price of refined oil due to concerns about rising costs and even lack of raw materials, which would lead to a decrease in refined oil products.

In addition, it is reported the consumption tax has also been adjusted in 2025, and the refund ratio is implemented based on the output rate of refined oil, which has also led to an increase in refinery costs.

Gasoline prices have soared, factories have become more active in using toluene and MX as blending components. The market anticipates the prices to rise supported by blending demand. As a result, discussion and trading prices of PX also moved up on Monday morning. PX price gained more than $20/mt, and also the spread of May PX-naphtha papers was traded up to $242/mt compared to $230/mt last Friday.

Most of the direct raw material MX for the production of PX comes from within the refinery. When gasoline demand is lukewarm, factories tend to use MX to produce PX. If the economics of PX units based on MX are good, the factory will also purchase MX from the market to increase production.

However, since the New Year, MX prices have continued to rise, the economies have been compressed, and most factories have stopped purchasing MX. At present, most of PX production relies on self-sufficiency in raw materials within the factory. Under this circumstance, China domestic PX plant operating rates have dropped slightly compared with the previous period.

Although some companies in Shandong have lowered gasoline prices on Monday, the sharp increase in domestic gasoline, aromatics and naphtha prices has brought cost increases to PX. It may also cause a reduction in the amount of MX procurement in some factories, which may lead to unplanned adjustments in the PX operating rates. But this situation is not obvious at present.

Last week, some PX units outside China have cut operating rates, and if China domestic operating rates also experience an unplanned reduction, the upward momentum for PX prices may be stronger. But from the perspective of supply and demand, domestic PX could see increase in stocks in January and February. The trading of PX in the second half of this week will roll over to March and April, and by then PX will enter the maintenance season, and the inventory could begin reducing.