European Mixed Xylene Market Decelerates Amidst Fragile Demand and Tactical Destocking

As the curtains fall in 2023, Mixed Xylene prices have been dragged down across the European market, after experiencing a bullish rally in the prior week. The Mixed Xylene market in Europe faces challenges marked by increasing supply, decreased production cost, and most significantly, persistently weak demand.

According to ChemAnalyst latest database, Mixed Xylene prices have showcased a decrement of USD 40/MT in the German market during the third week of December 2023. The feedstock Naphtha prices have continued to decrease amid the weak procurement from the other end-use industry which resulted in the low production cost of Mixed Xylene in the domestic market. The decline in the production cost of Mixed Xylene has promoted the manufacturer to revise their Mixed Xylene prices. However, on the other hand, upstream crude oil prices have edged up about 1% from a five-month low in the previous session on a bigger-than-expected weekly withdrawal from U.S crude storage and worries about the security of Middle East oil supplies after a tanker attack in the Red Sea. Market sources report Brent's future rose $1.02 or 1.4% to settle at $ 74.26 a barrel. Although currently, it has not impacted the prices of feedstock Naphtha.

On the demand front, the pace of inquiries originating from the downstream Xylene derivative chain notably o-xylene, p-xylene, and m-xylene industry has remained slower-than-expected in the light of off-season dullness across the domestic market, leading the bearish market sentiments of Mixed Xylene among the manufacturers. In addition, ifo Business Climate Index decreased from 87.2 points in October to 86.4 points in November 2023. Furthermore, contributing to unsupportive production costs, a persistent slowdown in downstream demand has also kept sellers under sales pressure, promoting them to ease the prices in order to destock the mounting inventories.

Regarding domestic production, Mixed Xylene plants have been running at reduced rates, at around 60-70% since Q4 of 2023 as manufacturers reported no sign of improvement in the downstream demand and it is anticipated that operating rates will remain soft until the first half of 2024. In addition, the German manufacturing activity worsened again during December 2023, mirroring a weak demand. Despite the lower operating rates, the domestic market was well fed by the excessive inventories which further weighed down the prices of Mixed Xylene within the domestic market. As a ripple effect, prices of Mixed Xylene FOB Hamburg were settled at USD 820/MT during the week ending 15th December.

ChemAnalyst anticipates that Mixed Xylene prices might remain on the lower side as demand from the downstream industry is not likely to improve throughout December 2023. However, looking ahead to Q1 of 2024, Mixed Xylene prices are projected to rise albeit at a slower pace due to further expectations of an increase in feedstock Naphtha prices. Meanwhile, purchasing activities might be triggered by restocking needs rather than an uptick in derivative sectors throughout 2023 due to a lack of visibility with regard to order entries at the converters level.