Paraxylene (PX) markets in Asia are likely to remain under pressure with a huge volume of oversupply coming in this year due to several Chinese producers having announced capacity additions amid expectations of a surge in short-to-medium term demand. A majority of global businesses have shown a recovery in post-pandemic demand, but the speed of growth is yet to accelerate. The Ukraine war which began in February 2022 has pushed the global financial recovery into uncertainty, to which PX is no exception.
According to a periodical report published by the United States-based global research firm OPIS, a new wave of expanded Chinese PX facilities was commissioned in 2022 that includes Sinopec’s unit in Jiangxi’s Jiujiang city that started in May with 0.9 million metric tonnes per annum (MMTPA). Also, Shenghong Petrochemical commenced commercial production at its 2 MMTPA of PX unit in October, and Dongying Weilian Chemical with 1 MMTPA in November last year. Cumulative, the three large plants added 3.9 MMTPA of new capacity in 2022.
Similarly, Shenghong Petrochemical has announced that it would initiate commercial production on another 2 MMTPA PX units this year. This is not the only company which announced capacity additions in 2023. CNOOC Huizhou Petrochemical and CNOOC Ningbo Daxie Petrochemical have announced capacity additions of 1.5 MMTPA and 1.6 MMTPA in 2023 respectively. Additionally, CNPC/PDVSA Guangdong Petrochemical and Zhejiang Petrochemical are also commencing new capacity of PX production to the volume of 2.6 MMTPA and 2.3 MMTPA this year respectively.
“Producers have been grousing about PX oversupply in 2022 amid multiple of new PX plants commissioned. And there are many more plants expected to come on stream in 2030, mostly from China. These PX start-ups clash with a troubled downstream purified terephthalic acid (PTA) industry which is suffering from reflux amid weak demand. Consequently, PTA plants have reduced their operating capacity to 60 percent in the key China market. PTA producers, in turn, shift the blame to the miserable polyester market. However, there is a ray of hope for PX amidst the doom and gloom – the gasoline blend pool can emerge again as saviour,” said the report.
Global production of the organic chemical PX is estimated at around 84 million tonnes with 6.2 million tonnes added in the calendar year 2022. Similarly, PTA output worldwide is expected at nearly 98 million tonnes due to a slowdown in new capacity additions during the two years of the pandemic. Chinese PTA producer Zhejiang Yisheng New material commenced commercial production at its 3.6 million tonnes in 2022. During the calendar year 2023, however, most Chinese producers have declared to start commercial production on 12.5 million tonnes of new PTA plants.
According to reports, these new capacities make no sense from the perspective of existing PX producers, who have crimped 2022 production amid poor margins. At least two in the Middle East were heard covertly shutting down their operations for at least one month each. Of course, this was an unprecedented move, analysts said.
| New PX plants (‘000 tonnes) |
| Particulars | 2022 | 2023 | 2024 |
| CNOOC Huizhou Petrochemical | | 1,500 | 600 |
| CNOOC Ningbo Daxie Petrochemical | | 1,000 | |
| CNPC Guangdong Petrochemical | | 2,600 | |
| Dongying Weilian Chemical | | 980 | |
| Shenghong Petrochemical | 2,000 | 2,000 | |
| Sinopec Jiujiang | 890 | | |
| Zhejiang Petroleum and Chemical | 2,400 | | |
| Idemitsu Kosan | | 420 | |
| Mangalore Refinery and Petrochemicals | 920 | | |
| Saudi Arabian Oil Company | | 800 | |
| PX Grand Total | 6,210 | 9,300 | 600 |
Source: Report
New Chinese PX capacities will saturate the market with a combined production capacity of 13.9 MMTPA. In turn, downstream PTA plant start-ups commissioned in 2022, and expected in 2023, include Dongying Weilian, Hainan Yisheng, and Hengli Petrochemical Huizhou with 2.5 MMTPA of PTA production capacity each, Jiangsu Jiatong Energy with 5 MMTPA, and Zhejiang Yisheng New Material with 3.6 MMTPA.
| New PTA plants (‘000 tonnes) |
| Particulars | 2022 | 2023 | 2024 |
| Dongying Weilian Chemical | | 2,500 | |
| Formosa Chemical Industries | | | 1,500 |
| Hainan Yisheng Petrochemical | | 2,500 | |
| Hengli Petrochemical Huizhou | | 2,500 | 2,500 |
| Jiangsu Hailun Petrochemical | | | 3,200 |
| Jiangsu Jiatong Energy | | 5,000 | |
| Sinopec Yizheng Chemical Fibre | | | 3,000 |
| Zhejiang Dushan Energy | | | 2,700 |
| Zhejiang Yisheng New Material | 3,600 | | |
| SASA Polyester Sanayi | | | 1,500 |
| PTA Grant Total | 3,600 | 12,500 | 14,400 |
These PTA capacity additions total 16.1 MMTPA and will require less than 11 MMTPA of PX to run at full blast. Consequently, the PX market will flood with 2.9 MMTPA of additional overcapacity. In fact, a growing surplus of PX has eroded the bargaining position of PX suppliers, while strengthening leverage for PX users in the key PTA sectors.
The lack of settlements represents a gradually diverging view of PX prices between buyers and sellers. In particular, buyers were in no rush to settle the PX contracts at unfavourably high levels, expecting spot prices to be in their favour amid ample supply.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
