Petrochemical Market Update (April-May 2024)

In this quarter, various price fluctuations have been seen in the market of oil and petrochemicals. Various factors led to these price fluctuations. During the May Day holiday, the Energy Information Administration (EIA) reported a significant increase in US crude oil production. The market also saw an unexpected surge in US crude oil inventories. This sudden rise, with the possibility of interest rate cuts delayed by the Federal Reserve, easing of geopolitical tensions currently, and a global demand slowdown, collectively contributed to a sudden decline in oil prices. Specifically, WTI and Brent crude oil prices fell by 4.7% and 4% respectively, dropping from $81.93 and $86.33 on April 30th to $78.11 and $82.96 per barrel on May 3rd.

Impact of the Declining Oil Prices on Naphtha and Petrochemicals

Due to the decline in oil prices, naphtha also fell, dropping by 4.5% from $712.75 on April 30th to $680.88 per ton CFR. During the same period, mixed xylene (MX) and paraxylene (PX) also fell, but both saw decreases in downstream and upstream raw materials. MX prices dropped from $989.5 to $974 per ton FOB in South Korea, representing a 1.6% decrease. PX prices fell by 1.3%, from $1038 to $1024 per ton CFR China.

Paraxylene Market Analysis

The PX-MX price spread remained low, recording only $28/mt on FOB Korea basis on May 3 and hitting a low point of $19/mt on May 2, a new low since mid-November 2022. Some PX units based on merchant MX outside China faced economic challenges, potentially leading to production cuts. However, the PX-naphtha price spread remained acceptable, hovering around $340/mt on a CFR basis. The TDP margin was also positive, with a spread at around $190/mt, which would be supportive to PX plant operating rates.

Paraxylene Plant Operating Rates and Maintenance

During the holiday, PX plant operating rates were largely stable. In the week beginning from May 6, SK’s 400kt/yr line and Weilian Chemical’s two lines with a combined capacity of 2 million mt/yr would undergo scheduled maintenance.

South Korea’s Paraxylene Exports

In other news, South Korea exported about 422kt of PX in April 2024, showing an increase of 37kt from the previous month. The majority of these exports, about 332kt, were destined for the Chinese mainland, marking a significant rise of 69kt compared to the previous month. Other destinations for South Korea’s PX exports included Brazil, Taiwan, and the U.S.

OFB’s Insight on the Petrochemical Market

The decline in oil prices has led to a decrease in naphtha and petrochemical prices, with PX-MX price spreads reaching new lows. Despite these challenges, the PX-naphtha price spread remains acceptable, and the TDP margin is positive, supporting PX plant operating rates. As the market continues to grow, it will be important to monitor these trends and their impact on the petrochemical industry.

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