the chart of PX supply and demand balance in China

On the demand side, Xinfengming’s other 1.1 million mt/yr PTA line is expected to start trial run in the end of Nov; Hengli Petrochemical’s 4# 2.5 million mt/yr PTA unit is scheduled to begin trial operation in the end of Dec; and Xinjiang Zhongtai’s 1.2 million mt/yr PTA unit is likely to start trial run in end-Dec or Jan.

From PTA capacity expansion, demand for PX will increase. However, given that Xinjiang Zhongtai’s PTA plant startup could lead to shutdown of other PTA plant due to the contention for feedstock PX, increase in PX demand could not entirely offset the new supplies from Zhengjiang Petrochemical and Hengyi Brunei, theoretically.

From the chart of PX supply and demand balance in China, after the inventory reduction since this Feb, the inventory rebuilt up in Sep, as new PX plants released production while several PTA plants were shut unscheduledly due to poor economics. It is expected that the inventory to consumption ratio of PX will rebound to 1 month as of the end of 2019.

In addition to the weak fundamentals, downstream polyester and end-use plant operating rate could decrease in the second half of Dec, and demand in the industry chain could weaken with new year coming.

In a conclusion, though PX-naphtha spread has dropped to 5-year low, it could fall further due to longer PX supply. For market to reverse the trend will largely depend on reduction of PX supply.