Bearishness Pervade in European Mixed Xylene Prices in last week of May, All Eyes on June

Hamburg, (Germany): In the last week of May 2024, Mixed Xylene prices persistently dropped across the European market amid a knee-jerk response to bearish crude oil futures, challenging economic headwinds, and thin derivative demand. Nevertheless, elusive supplies due to persistent Red Sea disruptions, coupled with low domestic operating rates, deterred steep falls. Now, the question is whether the bearish sentiments will continue next month.

In Germany, Mixed Xylene prices decreased by USD 30/MT during the week ending May 31, 2024. Feedstock Naphtha prices continuously dropped, resulting in lower production costs for Mixed Xylene in the domestic market, leading to bearish market sentiment among manufacturers. On the other hand, crude oil prices slumped last week to the lowest in three months due to a forecast of slower demand growth than previously expected, rising stockpiles in the US, and uncertainty over the extension of voluntary production cuts by OPEC. The decrease in oil prices further reduced the overall manufacturing cost of Mixed Xylene. Meanwhile, producers of Mixed Xylene have lowered production rates due to the current level of demand in the domestic market. However, the level of inventories was also limited to meet existing downstream demand.

Generally, the demand for Mixed Xylene from the downstream p-xylene, m-xylene, and o-xylene industries has been average across the domestic market amidst recent environmental challenges, weighing down the prices of Mixed Xylene. The spot market transactions were also flat, with most buyers staying on the sidelines. As a result, prices of Mixed Xylene FOB Hamburg were settled at USD 960/MT during the same time frame. Market players speculate that the current pricing level will lead to a further reduction in production to avoid running at a loss.

However, torrential rain and flooding in Germany have led to evacuations in parts of the south of the country, hitting already-strained supply lines through central Europe and halting transport along some sections of the river Rhine. Although the current water levels do not impact the production and supply of Mixed Xylene in the forthcoming weeks, several participants expect the flooding to have a significant impact on the domestic market.

Looking ahead, ChemAnalyst anticipates that Mixed Xylene prices may decline in the European market due to weak derivative demand and diminishing hopes of notable demand improvements over the near term, given the approaching holidays. Moreover, feedstock Naphtha prices are likely to decline, which might further ease the overall production cost of Mixed Xylene.