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Asian PX Outlook for Q4 2023


In a report last month, we took an in-depth view of how many chemical markets have found some relief from a bearish economic outlook and weak derivative consumption this year through a recovering gasoline market and more demand into the blending sector. In this issue, we analyse how this is impacting the Asian paraxylene (PX) sector in particular, as well as how the PX market is adjusting to the new downstream facilities amid struggling demand.

Consumption into the Asian polyester markets remains slow, and this is likely to keep run rates curbed as the new downstream terephthalic acid (PTA) units are gradually brought online between now and the end of the year. However, a stronger refining sector is helping bolster underlying feedstock costs for PX, as sellers find more value in the blending pool for high octane components such as toluene and mixed xylenes (MX). This could leave a lot of Chinese PX production economics unworkable and open the door for more imports from deep-sea suppliers out of the Middle East in the coming months.

While the global transport fuel market has been on a steady road to recovery after the worst impacts of COVID and the pandemic, more recently we have seen refining margins buoyed in Asia by several other regionally specific factors. 

A wave of refining outages has pushed up numbers in tandem with improvements on demand, and some upcoming refinery maintenance in India and the Middle East is adding more bullishness to the sector.

As a result, a lot of chemical feedstock components have been moving into the blending sector due to a better netback, and it remains uneconomical to produce PX from either xylenes or toluene in Asia. The large majority of these volumes are moving into the regional gasoline pool or, as we saw in a Hot Topic last month, it is being shipped into the US market.

Looking further ahead into Q4, there are concerns that the winter season will see gasoline demand ease off due to seasonal factors. This could see refiners and other producers pivot back to the PX/polyester chain for an outlet, just as PX production is likely to tighten up due to some planned maintenance outages in NE Asia and the Middle East beginning in October.

Once again, it could well be the recurring disconnect we see between upstream and downstream production in Asia that drives more demand for deep-sea imports of bulk chemicals by October.

With more derivative PTA production entering the Asian market, these units may have to source PX from other regions if local margins aren’t healthy enough to support output, or the gasoline blending pool continues to draw on feedstock components.

The obvious caveat to this would be expectations of underlying demand, with a sluggish economy still limiting how hard the polyester chain will run for the rest of 2023, but any stimulus package from the Chinese government would likely spur more consumption in the near-term, and this would potentially need to be fed by imported PX volumes.


For further information about trends in the chemical market, speak to an expert in our Specialised Products team.


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