Asian PX: Falls $9.50/mt Thursday, tracking weaker PTA

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– May delivery cargoes trade twice in MOC

– May Chinese PTA futures fall Yuan 74/mt on day

Asian paraxylene prices fell $9.50/mt day on day at $1,109.17/mt CFR Taiwan/China and $1,090.17/mt FOB Korea Thursday, tracking declines in downstream purified terephthalic acid prices. The most actively traded domestic May PTA futures on the Zhengzhou Commodity Exchange fell Yuan 74 to Yuan 6,514/mt at close of afternoon trade Thursday, while prompt loading material was assessed Yuan 25/mt lower at Yuan 6,575/mt ex-tank. This prompted heavy selling pressure for May-delivery paraxylene cargoes Thursday, with multiple sellers seen emerging mid-afternoon. During the  Market on Close assessment process Thursday, GS Caltex bought two May-delivery cargoes, at $1,108.50/mt CFR Taiwan/China from Mercuria, and $1,108/mt CFR Taiwan/China from Yisheng, respectively. An outstanding April bid from Litasco at $1,112/mt CFR Taiwan/China stood at the close of MOC assessment process without any traders expressing further interest. Meanwhile, feedstock isomer-grade mixed xylene was assessed stable at $652/mt FOB Korea Thursday. The spread between PX and its feedstock isomer-MX widened to an almost eight-year high of $466.67/mt in Asia on Tuesday amid a glut of MX supply and firm PX prices caused mainly by maintenance shutdowns at PX plants, S&P Global  data showed. Tuesday’s spread was the widest since March 30, 2011, when it hit $467.50/mt. “It is basically due to PX plants’ turnarounds,” a Northeast Asian MX trader said Thursday, explaining the weakness and glut in the Asian MX market. A frequently mentioned cause of the oversupply in MX is South Korean S-Oil’s long shutdown and maintenance at its No. 2 plant at Onsan, which can produce 1.1 million mt/year of PX. The shutdown is expected to commence end March and may last for more than five months, according to market sources familiar with the matter. Hence, relatively large volumes of excess MX are likely to flow to the market at a time when demand is also lower due to several turnarounds of PX plants in Asia. Also, Taiwan’s Formosa Chemicals and Fibre Corp. plans to shut its No. 1 aromatics plant in Mailiao from the middle of April to the end of May for annual maintenance, further dampening MX demand in Asia over the second quarter. In statistics news, PX recorded a 6.3% month on month decline in South Korean exports for the month of February as the largest importer China was absent for almost half of February due to the Lunar New Year holidays.

RATIONALE:

Asian PX prices fell $9.50/mt day on day at $1,109.17/mt CFR Taiwan/China and $1,090.17/mt FOB Korea Thursday. The markers take an average of the H2 April and H1 and H2 May laycans. The H2 April laycan was assessed at $1,112.50/mt CFR Taiwan/China, above an outstanding Asian-origin April bid from Litasco at $1,112/mt. The bid was normalized due to a restriction in origin. The May laycans were assessed at $1,107.50/mt, at the level of the last normalized trade for May between Yisheng and GS Caltex, and below an outstanding May offer from Mercuria at $1,108.50/mt. The trade was normalized due to a restriction in origin. The May laycans were also assessed at the pegged $5/mt backwardation to the H2 April laycan. The above rationale applies to the following market data codes: “PHASS05” for FOB Korea and “AAQNE00” for CFR Taiwan/China.

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