European PX firms after 17 year lows on a stronger MX

http://www.petrotahlil.com/en/tiny/news-44139

Petrotahlil - European paraxylene prices continued to recover from the 17-year low at the start of this week, rising $10/mt Wednesday.

The already struggling European paraxylene industry was hit hard by the spread of coronavirus outside Asia as well as swings in the upstream oil prices. FOB Amsterdam-Rotterdam-Antwerp paraxylene has lost around 28% since the start of March, to be assessed at $450/mt Wednesday, according to S&P Global Platts data.

For the past several months, the export market has been a key vent for European paraxylene, with the majority of exports heading to Asia.

"Asia is the most liquid market," one source told Platts.

This has kept the Asia-Europe paraxylene differential above $70/mt on average for the past six months.

Nevertheless, with Asia experiencing an inventory glut amid transportation and logistical issues, market participants are diverging in their views as to the current state of the European export market for paraxylene.

The Asia paraxylene market has been having a tough time as well since the start of the year, with inventories building in tandem with limited domestic demand, according to sources in Asia.

There has been limited demand from the downstream PET industry, with traders in Asia worried that overseas demand for textile and apparel goods would weaken with the global spread of the virus.

"No one will produce PX without a customer, if you have a customer you will not sell it for exports to Asia," one trader said.

Even with levels of trading activity in Europe lackluster, some market players see European paraxylene prices at close to Asian levels. One trader told Platts recently that some European consumers buy PX at Asian prices, so in order for European producers to compete, they have to offer at a marginally lower price.

"Around $20/mt below Asia is a reasonable rate to compete," the trader added. As a result, European paraxylene is more likely to track changes in the upstream mixed xylenes market, sources said.

"PX tracks MX at about $200/mt [differential] at the moment," the second traded said on Tuesday.

Weaker paraxylene prices in Asia have narrowed the differential between the two regions to $39.50/mt as of Wednesday, reducing the arbitrage opportunity for European exports, with Rotterdam-Far East 5,000 mt freight rates last being assessed at $90/mt Friday.

According to data from Panjiva, the only exports from Europe in the first quarter were just under 15,000 mt to the US, compared with more than 70,000 mt in Q1 2019.

"There are US producers looking to export out of the US...I am doubtful that we need the product," a US based trader said this week.

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