In December 2024, the Mixed Xylene market in China saw a marginal decline in prices as compared to November, due to the underlying tight supply and rising raw material costs. Several interrelated factors contributed to this tempered price decline, which can be attributed to both production-related challenges and broader market dynamics.

A key factor that prevented a steep fall in Mixed Xylene prices was the ongoing tight supply situation. Although the domestic production of Mixed Xylene faced challenges, particularly with rising raw material costs, the overall supply remained constrained due to several factors. First, the price of upstream naphtha, which is the primary feedstock, had been rising since mid-November, up by 3.03% by mid-December. Typically, higher naphtha prices would lead to increased production costs, thereby pushes xylene prices higher. However, the slow decline in Mixed Xylene prices can be attributed to the market's response to this, which was more gradual than anticipated. The domestic production of Mixed Xylene was under pressure due to rising raw material costs, but producers responded by reducing their operating rates to cope with these rising costs, slowing the pace of production increases.

Additionally, stricter environmental regulations in China led to the shutdown of inefficient production facilities, further limiting the supply of Mixed Xylene. Although these regulatory pressures on production should have reduced supply, they also led to less market volatility since many producers faced similar challenges and adjusted their operations in response. This resulted in the price decline of Mixed Xylene being slower than expected, as the market adapted to the production constraints.

From an import perspective, the closure of arbitrage opportunities between domestic and international Mixed Xylene markets also played a role in the slower price decline. The narrowing of the price gap between domestic and international markets led to reduced import volumes, which could have exacerbated supply shortages. However, this was not the case as external demand, particularly from overseas markets, was weak during this period. This, combined with reduced stockpiling, limited the increase in imports that could have otherwise pressured domestic prices downward. The stagnant market activity due to weak demand from downstream industries like chemicals, coatings, and automotive sectors further contributed to this slower decline.

Furthermore, the self-consumption rate among domestic Mixed Xylene producers increased, with many companies opting to use more of their production for internal needs rather than selling it to external buyers. This shift further reduced the availability of Mixed Xylene in the external market, preventing a sharp drop in prices despite the weaker external demand.

Looking ahead to January, the outlook for Mixed Xylene prices in China remains cautiously optimistic, with the likelihood of stabilization or moderate recovery. The tight supply situation will continue to support price stability, as domestic production remains constrained, and imports remain limited. The demand particularly from the improving automotive and coatings industries, could stimulate increased consumption of Mixed Xylene, providing some support for prices. However, challenges remain, particularly in terms of overall market sentiment. The economic recovery in China and globally is still fragile, and while demand from key sectors is expected to improve, the pace of recovery is uncertain. This means that while prices may stabilize, they are unlikely to experience a sharp rebound in the short term. The overall trend in the market will depend largely on how quickly downstream sectors recover and whether supply-side constraints persist.

The rising costs of raw materials, especially naphtha, will continue to add upward pressure on xylene prices. However, without a significant increase in demand or further disruptions in supply, any price recovery will be gradual. The market will likely remain sensitive to fluctuations in global economic conditions, as well as to shifts in the supply-demand balance in both domestic and international markets. Therefore, January is expected to see Mixed Xylene prices stabilize or slightly rebound, but the market will remain vulnerable to fluctuations based on external factors.