SE Asia solvent MX falls on sluggish demand; market converges with China

SINGAPORE (ICIS)–Southeast Asia’s mixed xylene (MX) markets remained under pressure from coronavirus-induced lockdowns, with prices in the region now nearly at par with or below those in China.

Excess MX volumes in the region could be sold to China amid an open arbitrage window.

Downstream factories in southeast Asia and south Asia are forced to cease operation since two weeks ago due to government measures to contain the spread of the deadly novel coronavirus, which started in China in late 2019.

Demand for MX from the industrial and marine paints sectors was sluggish, according to a source at Thailand’s biggest paint producer, adding that sales have declined 50% for both decorative and industrial paints.

From the agricultural business, MX consumption for pesticides and insecticides was hit by recent curfews imposed in southeast Asia.

On the consumer products side, usage for solvents, adhesives, lacquers in wooden furniture industry was lower by more than 40% in Vietnam and Malaysia, according to market participants.

“We might receive late payment for our previous sales due to bad business,” said a southeast Asian distributor.

Local distributors were negotiating with southeast Asian producers to reduce their monthly contractual volumes by 30%-50%.

“The only customers left are food packaging makers, which are considered essential products, but their usage for solvents is very limited,” said a southeast Asian distributor.

Sales to India was virtually zero due to a complete shutdown of downstream factories and transportation services amid a 21-day lockdown in the country.

To make things worse, supply will lengthen as Thailand’s Map Ta Phut Olefins Co (MOC) is likely to postpone a turnaround at its cracker from early May as a measure to reduce the risk of spreading the coronavirus, according to a source close to the company.

However, it seemed to be consensus among naphtha cracker operators in Asia to lower run rates, especially since the value of key products – polyolefins – are falling.

Import discussions for solvent MX were at a wide range, with buying indications at $310-330/tonne CFR SE Asia against selling indications at $350-370/tonne.

Spot prices in southeast Asia are now either on par or below China’s import prices.

Typically, import prices in southeast Asia are higher than those in China, which has a 7% duty on imported MX. Imports of the material to most southeast Asian countries are duty-free.

On 8 April, buying indications on a CFR China Main Ports (CMP) basis were at $320-330/tonne against selling indications at $350-360/tonne.

In China, a large portion of solvent MX was used in gasoline blending.

Domestic gasoline prices are currently supported by the country’s fuel floor price mechanism, effectively lending support to MX.

The MX market is also backed by improvement in the transportation sector as coronavirus-containment measures in China have eased.

The 76-day lockdown on Wuhan, the capital of central Hubei province and the original epicentre of the novel coronavirus outbreak, was lifted on 8 April.

Focus article by Keven Zhang

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