Santosh Navada of Argus discussed with Alicia Goh, Argus' senior reporter in Singapore, the key factors that could influence paraxylene and its derivatives demand in the upcoming months.
Santosh: Could you give an overview of recent developments in paraxylene (PX)? How have inventory levels been in China? Were there any significant changes compared with last year?
Alicia: Paraxylene had a challenging 2024 year as China grappled with rising domestic inventories and increased production, while the recovery in global demand seemed to be in its early stages. A significant drop in buying interest for prompt December cargoes led to a price decline, as seasonal demand remained weak. PX demand typically falls from November to December, entering a period of low buying. The PTA polyester chain went through a restocking phase in October, in anticipation of winter clothing demand, and entered the year-end low period in December. Scheduled maintenance at Shenghong's 2.4mn t/yr PTA unit in Lianyungang, which reduced China's overall PX consumption, also affected PX prices.
PX spreads are likely to remain under pressure in the near term until there is a demand increase and the excess inventory is absorbed. PTA-PX spreads will also remain low as two new PTA plants in China and one in Turkey, totalling around 6mn t/yr of capacity, are expected to start up over the next six months.
In 2025, Demand for PX in the key Chinese market seems to be recovering slowly after the New Year holidays. Chinese PTA producers have announced production cutbacks recently in response to tepid PET/Polyester sales. However, PX demand-supply balance in the near term should still get tighter due to ongoing production cutbacks in Korea and announced shutdowns in China. Resumption of substantial PX exports from Korea to the US since Jan’25 will further support this trend. There continues to be uncertainty about Yulongdao’s PX plant.
Santosh: Shifting our focus to South Korean and Japanese PX producers, how are they coping in this environment?
Alicia: South Korean based chemical firms are facing substantial challenges in the current environment. For one, Middle East market participants with access to low-cost feedstock and the ability to scale quickly are eroding the cost benefits the South Korean based chemical firms used to enjoy. The increasing sophistication and integration of new Chinese players, along with weakening growth rates, is also eroding these firms’ market edge.
Japan is experiencing a series of closures that are partially prompted by the growing Chinese capacity. Additionally, high electricity and natural gas costs along with declining competitiveness in the petrochemical sector have contributed to loss of market share.
Santosh: Could you give an overview of recent developments in mixed xylenes and toluene? Additionally, were there any significant changes in inventory levels in mixed xylenes?
Alicia: Talking of mixed xylenes, following President Trump's election win, fears of higher tariffs on imported products negatively impacted the market outlook, leading to a decline in product prices at the end of 2024. The market saw a slowdown in Chinese downstream exports, which put additional pressure on mixed xylenes prices, on the implementation of higher tariffs. The start of Yulong's mixed xylenes production in October further affected domestic prices, as the significant increase in new production impacted domestic inventories.
East China inventories, by the end of October, rose by 75pc to 77,700 tons, compared with 44,300 tons at the end of September. Inventories exceeding 70,000 tons were last recorded in April 2024, before the peak gasoline demand season. The introduction of product from Yulong Petrochemical into an already saturated market exacerbated the situation further.
In 2025, Demand for MX into gasoline blending and for export to the US remains steady, supporting the Asian prices. Recent production cutbacks in PX remain a worry for MX demand, though there should be adequate support for MX heading into the 2025 summer gasoline season.
When it comes to toluene, prices stayed low at the end of 2024, influenced by falling downstream PX values and weak solvent demand in Southeast Asia. This is evident by the decline in Asia-Pacific PX spot prices, which reached a multi-year low of below $800/t around the middle of November.
High inventories at East China ports further pressured domestic prices, along with weaker blending and chemical demand in the market.
At the start of 2025, toluene prices remain supported by healthy demand for gasoline blending and an open arbitrage to the US, however demand from toluene disproportionation/selective toluene disproportionation (TDP/STDP) units is subdued due to squeezed margins while demand from the solvent sector remains soft.
In 2025, the recent improvement in PX and BZ prices has provided some support for continued operations of TDP units, though TDP margin remains squeezed. Improved demand for PX heading into the high polyester season in the spring can support TDP operations in the near term.
Santosh: Turning to PTA, how has it performed in 2024? Are there any significant developments expected in China and other key countries in the region?
Alicia: In 2024, PTA demand was originally expected to remain stable as PET producers maintained a high overall production rate in China. The expectation was orders from the clothing industry would ensure robust PET fibre production. Consequently, PET fibre producers completed their destocking and resumed their normal purchase of raw material PTA. But the warm winter till February 2025 disrupted winter garment order plans, thus reducing PTA demand from PET fibre producers.
Besides China, India and Turkey continue to be key markets. SASA's investment in PTA has led to the commissioning of the largest PTA production facilities in Turkey. This development will advance the country's self-sufficiency in PTA, significantly reducing PTA imports. The project is set to produce 1.5 million tons of PTA annually, using paraxylene and acetic acid as primary feedstocks.
PTA margins in China remain abysmal at around $40 levels which is below breakeven, and in the rest of NE Asia at barely breakeven levels in 2025. The recovery in PET/Polyester operations in China post the New Year holidays has been tepid so far, which has prompted PTA plant shutdown announcements by leading producers. It remains to be seen how the recovery progresses as we head into the traditionally strong spring season for polyester.
Santosh: How would tariffs impact PTA and PET, particularly of Chinese origin? Are there any other disruptions the markets need to be aware of?
Alicia: The domestic PTA market in China was disrupted in early November as a result of the outcome of the US presidential election. Fears of trade friction and additional tariffs imposed by the US on China led to a brief panic, causing PTA prices to fall by 3.4pc.
The new US administration has pledged to impose a 10pc tariff on all Chinese imports. It remains to be seen if the Chinese apparel export sector would be adversely impacted by this development.
It has pledged to introduce significant new tariffs to safeguard American industries, boost domestic manufacturing, and decrease dependence on foreign imports. It believes that these measures will create more plant positions, reduce the federal deficit, and make American-made goods more affordable by increasing the cost of foreign products. In response, Beijing has announced plans to impose reciprocal tariffs. However, instead of imposing a blanket tariff on all US imports, Beijing is expected to target specific industries.
Santosh: Thank you for being with us today and providing these valuable insights, Alicia. It will be fascinating to observe how these developments unfold, particularly with so many dynamic factors at play.
The data and insight included within this article come from the Argus Benzene Outlook service and the Argus Toluene and Xylenes Outlook service. Request a free trial or more information.
Author: Santosh Navada, Senior Business Analyst, Chemicals
Spotlight content
