Paraxylene margin improvements give way to cost pressure

Global paraxylene producers remain concerned over the prospect of slower growth and uncertain feedstock costs and availability, particularly inside China. The purified terephthalic acid (PTA) industry has reached a steady state with Asian production rates being trimmed to match seasonal demand. Margin improvements have been seen but looking ahead the real pressures on where to place Asian PTA surpluses are now unfolding.

PTA futures rose in April and with more production cutbacks potentially looming on the horizon, downstream sectors seemed abuzz with excitement of a potential rally but this is proving to be short lived as cost fundamentals really kick in. Nevertheless the prospect of tighter markets has been exciting paraxylene traders.

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Citing the shift of aromatics into gasoline blending and the imminent start of the driving season in the US, which could drive aromatics values higher in general into the early summer period, paraxylene traders were betting on a growing contango in the forward months of June and beyond. But some traders were also seeing some near term weakness and were expecting prices to dip again. 

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