Towards the last week of February 2024, Ortho-Xylene (o-xylene) prices have been on a bullish note across the European market due to severe supply constraints, stemming from upstream challenges and the ongoing disruption in the Suez Canal. Additionally, import prices have reached their highest levels due to longer transit times and elevated shipping costs resulting from the unrest in the Red Sea, triggering notable hikes. Needless to say, the limited availability of finished o-xylene stock has played a key role in the bull run across the European market. However, underlying demand has remained soft and stable amid the fragile macroeconomic climate. Market participants are anticipating a potential increase as the spring season begins.

Prices of o-xylene have shown an increment of USD 70/MT in the German market. The cost support from feedstock Mixed Xylene was sufficient for o-xylene as its prices settled on the higher end within the domestic market. Furthermore, manufacturing firms have been operating at reduced rates in the domestic market, leading to restricted material availability of finished o-xylene stock. Meanwhile, in the import market, supply conditions are no better. The impact of the Red Sea/Suez Canal crisis has suspended and restructured imports into Germany, combined with other logistical challenges. As a result, imported o-xylene prices have dramatically increased across the domestic market.

However, on the other hand, global ocean freight rates have corrected down from the past few weeks after skyrocketing in January 2024. The sudden decline in freight rates was attributed to major shipping companies starting to add vessels and optimize their operations amidst current shipment conditions in the Red Sea, but they remain well above pre-Suez crisis levels. Conversely, demand for o-xylene from the downstream Phthalic anhydride industry has remained lackluster, as consumption from the end-user construction sector has slowed down across the domestic market. Spot market transactions remained stagnant, with terminal firms showing little eagerness to engage in market activity. Nevertheless, it was insufficient to drive the price realization of o-xylene to the lower end of the domestic market. Overall, tight supply has dominated the o-xylene market. As a ripple effect, the price of o-xylene CFR Hamburg was settled at USD 1380/MT during the week ending 23rd February 2024.

Looking ahead, ChemAnalyst anticipates European o-xylene prices might rise in the forthcoming weeks as market players restock inventories across the region in the hope of increased demand from the downstream industry. Additionally, feedstock Mixed Xylene prices are likely to increase, which might positively impact o-xylene production costs. Moreover, the lingering turmoil in the Red Sea will continue to keep lead times longer than usual for a while longer, further raising the price of o-xylene.