Asia PX-Naphtha Spread Falls 19% on Month Amid Lower Energy Costs, Weak Demand
The Asia paraxylene-naphtha spread weakened in the first 13 days of July, narrowing 19.1% compared to the corresponding period in June to $310.48 per metric ton CFR China on the back of falling energy costs and sluggish demand, which dragged down spot PX prices sharply over the same period, OPIS data shows.
The last time the spread was at this level was on Feb. 25, when it stood at $311.33/mt, according to OPIS data.
Despite the recent squeeze, the Asia PX–naphtha processing margin remained in positive territory through July thus far, staying comfortably above the industry’s $250/mt breakeven threshold.
While firmer energy prices supported aromatics gains in June, upstream cost pressure softened heading into July. Front-month Brent crude oil futures dropped 19.5% over the first 13 days of July, averaging $75.03/bbl on the Intercontinental Exchange—removing a key layer of cost support for spot PX prices.
In addition, underlying demand for PX began to soften as major purified terephthalic acid or PTA producers in China started annual turnarounds. Data from Chemical Market Analytics by OPIS shows that 895,000 mt of Chinese PTA capacity was offline in June, with offline capacity expanding to 1.164 million mt in July.
The several PTA plant maintenances carried out in these two months include Dushan Energy’s 3 million mt/year No. 3 plant, Yisheng Hainan’s 2 million mt/year plant, Honggang Petrochemical’s (Shenghong’s) 5 million mt/year plants, Jiaxing Petrochemical’s (Tongkun’s) 1.5 million mt/year No. 1 plant and Zhongtai Chemical 1.2 million mt/year facility.
As for PX, 628,000 mt of production capacity was taken offline in June while 1.122 million mt of capacity was offline in July amid plant maintenances, according to CMA data. These include Dongying Weilian’s 1.96 million mt/year plants, Fujian Fuhaichuang’s 800,000 mt/year plant and Sinopec Hainan 660, 000 mt/year PX unit.
Despite constrained regional PX supply from ongoing unit turnarounds, spot prices failed to gain traction through early July. Instead, weak downstream sentiment capped upward momentum, sending PX prices down 12.1% to average $1,006.75/mt CFR China over the first 13 days of July, according to OPIS data. The downward trend underscores how persistent weakness in polyester demand effectively negated any supply-side support.
Sluggish gasoline blending demand weighed on aromatics throughout June and July as Chinese refining margins tightened. China’s National Development and Reform Commission made a series of price cuts in gasoline and diesel prices in June and July. With effect from midnight July 3, the ceiling price of gasoline and diesel fell by 950 yuan ($140.13)/mt and 915 yuan/mt, respectively.
Eroding Chinese gasoline prices squeezed refining margins, prompting refiners to divert reformate away from the gasoline blending pool and into petrochemical production – a shift that helped cushion regional supply losses from ongoing plant maintenance.
Meanwhile, PTA processing margins—which reflect the profitability of converting PX into PTA—averaged 643.55 yuan/mt across the first 13 days of July, up 7.7% month on month. While these healthier margins encouraged PTA producers to increase production output and PX consumption, the start of the Chinese polyester sector’s cyclical low season in the third quarter effectively caps any potential demand surge for spot PX.
—Reporting by Serena Seng, sseng@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com