Market and product

Paraxylene (PX) prices in Asia may come under further pressure in months ahead if spot supply in the region remains surplus following an unplanned shutdown of downstream 1.3m tonnes/year purified terephthalic acid (PTA) capacity in South Korea, market sources said.

Asian paraxylene prices have been decreasing steadily for a month. PX was assessed at $806.50/tonne CFR (cost & freight) Taiwan and China in the week ended 6 November down from $842.50/tonne CFR Taiwan and China on 9 October, according to ICIS.

Hanwha General Chemical’s three lines in Ulsan, South Korea, have not been operating over the past month amid labour issues that are still ongoing.

The PTA producer has a 400,000 tonne/year PTA line in Ulsan and two more 450,000 tonne/year lines each at the same site.

Hanwha is aiming to restart the No 2 & 3 lines by end-November, although there are no firm restart dates yet, a source with knowledge of the matter said, while the No 1 line could remain shut for an indefinite period.

Negotiations with workers are understood to be in progress but there are no firm restart dates for the lines yet.

An extended shutdown at Hanwha’s Ulsan PTA plants would reduce the PX being consumed within South Korea and increase the volumes available for the regional spot market, industry sources said.

Hanwha General Chemical is one of major PTA producers in South Korea.

“A substantial South Korea’s PX supply is used to feed the domestic PTA industry. If this continues, we could see PX supply lengthening in 2016,” a source said.

Prior to Hanwha’s shutdown, PX supply had been described as balanced-to-short depending on consumption rates at downstream PTA units, as well as demand for aromatics blendstocks such as toluene and mixed xylenes for gasoline blending.

The current market condition may exert an influence on term contract negotiations between refiners and downstream customers next year, market sources said.

“There could be some changes to the premiums or discounts that were seen for this year’s contracts if the shutdown continues,” a market observer said.

Contract negotiations for next year’s PX term contracts are still in infancy, market sources said, with PX producers offering term contracts at slight premiums to last year’s contracts.

PX term contract negotiations typically start during the second-half of November and conclude by the second-half of December.

Hanwha General Chemical’s halting of operations points to underlying issues in the Asian PTA market, where the giant production capacity in Asia Pacific has dwarfed consumption and growth rates of downstream polyester makers.

South Korea has a total name production capacity of close to 7m tonne/year of terephthalic acid, including both purified and qualitied terephthalic acid. It maintained an overall operating rate of 80% in 2015, market sources had said previously.

Operating rates could continue even lower in 2016, adding further downward pressure to PX prices, they said.

Other PTA producers in South Korea include Taekwang Industrial, which has a 1m tonne/year plant in Ulsan.

Former PTA producer Samnam Petrochemical had previously converted three of its PTA lines to qualified terephthalic acid (QTA) lines – which also uses PX as feedstock. It currently runs a single PTA line.

Other producers include Lotte Petrochemical, SK Petrochemical and Hyosung Petrochemical.