European paraxylene market participants have been bearish at the EPCA conference in Berlin this year, and many said they expect the discounts on European contract settlements to increase in the coming year.
The bearish sentiment stems from a weak downstream market in Europe and an expected overcapacity in Asia.
Downstream producers of polyethylene terephthalate said demand has been weak in Europe, and in addition there is an increased threat of imports as a result of cheaper Asian prices and a strong euro, though it is not certain how long either of these situations will persist.
But several sources said they expect PET demand to be stronger in Europe in 2014 as a result of macroeconomic factors, with the European economy expected to return to strength, and particularly strong growth is expected in Eastern Europe.
In addition, Asia, the main PX region in terms of volume, is expected to become long on PX after being short on paper over the past year.
While Asia has been short because of a range of new purified terephthalic acid plants, a raft of planned PX startups are likely to change this.
Total Asian PX capacity — based on announced projects coming on stream from 2013 through 2017 — is expected to grow by 40% over the next five years, reaching 40 million mt/year, according to Platts data.
In the Middle East, PX capacity during the same period is expected to surge by 200%, reaching 10.85 million mt/year by 2017, from the current 3.4 million mt/year.
PTA capacity in Asia is expected to climb by 46% over the next five years, reaching nearly 67 million mt/year in 2017.
Given recent poor production economics, run rates have been reduced to 50-60% of capacity.
Even if run rates were to improve to 75% of capacity, the PX surplus in Asia would climb above 4 million mt in 2014, and surpass 8 million mt by 2017, Platts data showed.
The anticipated surplus in 2017 could be cut in half, though, if PTA producers increase operating rates to 85% as production economics improve. Any move by PX producers to reduce production rates below 80% also would potentially erode the anticipated surplus.
Sources at the EPCA said that at this stage, much of the new capacity is only nameplate, and regardless would only begin to affect the market in the second half of 2014, but still conceded that the PX market in Europe would be more of a buyers’ market over the coming year.
Sources said that the discount is currently likely to be around Eur18-20/mt, and would probably climb by Eur5-10/mt, though there will be a struggle to keep it the same.
Source: platts.com
