Europe Ortho-xylene Prices Pursue Bearish trend amidst Lukewarm Downstream Demand

Hamburg, (Germany): Heading into the third week of June 2024, Ortho-xylene (o-xylene) has significantly decreased across the European market due to weak raw material prices. Additionally, demand from the downstream derivative industry remains subdued amid ongoing economic challenges. The expected seasonal surge in the construction sector has not materialized, and despite domestic crackers maintaining reduced run rates and decreased import offers from Asia, sufficient material availability has supported a downward trend in regional prices.

According to the latest data from ChemAnalyst, o-xylene prices in Germany have dropped by USD 70/MT, reflecting continued weak market fundamentals. The domestic production cost of o-xylene has eased significantly, primarily due to a substantial reduction in feedstock Mixed Xylene prices, which has exerted downward pressure on domestic o-xylene prices. Furthermore, operating rates have remained low as downstream industry demand has not fully recovered domestically. Market participants noted that recent heavy rainfall and subsequent flooding in Bavaria and Baden-Wurttemberg did not significantly impact the o-xylene market, with trading activity remaining subdued. Meanwhile, Asian imports have faced logistical challenges, including cargo delays and disruptions in the Red Sea, although expectations suggest improved flow by the second half of July. Current material availability in the domestic market has been adequate to meet weak spot and contractual demand levels, resulting in o-xylene prices settling at USD 1380/MT CFR Hamburg by the week ending June 21st.

Conversely, inquiries for o-xylene from the downstream Phthalic anhydride industry have been fragile, with tepid buyer appetite persisting throughout the week. Broader macroeconomic pressures continue to limit demand from derivative sectors. Additionally, weak demand from the construction sector has kept pressure on the German o-xylene markets, with buyers adopting a cautious, hand-to-mouth approach, contributing to a bearish market sentiment among manufacturers. The procurement activities have slowed down considerably and hence the prices have dipped down in the region.

Moreover, the European Central Bank's first interest rate cut since 2019 aimed to control inflation, potentially lending support to demand for various commodities, including o-xylene used in construction industry applications sensitive to interest rate changes.

Looking ahead, ChemAnalyst anticipates o-xylene prices may gradually increase in the European market amid expectations of rising raw material Mixed Xylene prices. Furthermore, recovery in demand from the downstream Phthalic anhydride industry is expected in the near term, with potential support from the recent eurozone interest rate cut stimulating demand in the regional market. Thus, these changing dynamics are expected to strengthen market fundamentals and pricing sentiments in the European region for o-xylene.