Hamburg (Germany): Prices of ortho-xylene (o-xylene) have persistently increased across the European market during the third week of March 2024 due to high upstream costs and logistical issues impacting import material flow. Regional sellers had opportunities to enhance their margins by implementing price increases beyond costs in some cases, given delivery delays and a lack of imports. However, demand for o-xylene from the downstream industry did not show significant improvement across the regional market. Market players are now preparing for another round of potential increases in April, keeping an eye on the next feedstock settlement.

In the German market, ortho-xylene prices have risen by USD 50/MT. The cost side was a major driver of the uptrend, as raw material mixed xylene prices increased in the previous week. Brent crude oil prices have remained above $80 per barrel, indicating a tightening in the physical market due to ongoing OPEC+ production cuts and prolonged rerouting of cargoes away from the Red Sea and the Suez Canal. The increased crude oil prices have further pressured upstream mixed xylene to remain buoyant.

Moreover, manufacturing firms in Germany have been operating at reduced rates due to challenging economic conditions. Low operating rates have led to increased supply-side pressures as o-xylene availability has been relatively limited. Therefore, anticipating the increase in upstream raw material prices and low o-xylene supplies, manufacturers have opted for price increments to maintain their profit margins.

Alternatively, a decline in shipments from Asia, along with extended lead times and subdued purchasing interest, has tightened import availability in the domestic market. Despite a sharp rise in January, ocean freight rates have been declining due to tepid demand, dampening shipping activities. Market observers note that post-holiday demand has failed to see significant improvement. Furthermore, shipping companies have effectively managed their cargo volumes by utilizing additional capacities and opting for longer routes around Africa to optimize operations. Additionally, according to Freightos data, the global container freight index fell by 7% compared to the previous week, reaching USD 3,070/feu as of March 11, marking a three-week downward trend and a cumulative 10% drop since February.

Additionally, demand for o-xylene from the downstream phthalic anhydride industry has remained steady, while consumption from the construction sector has decreased due to fewer new projects in the domestic market. However, this minimal impact on o-xylene prices domestically. Market sources also indicate that German construction companies express pessimism regarding future activity, citing economic fragility and domestic political factors as potential constraints. Consequently, o-xylene prices CFR Hamburg were established at USD 1470/MT for the week ending March 15th.

ChemAnalyst anticipates that o-xylene prices are likely to rise in the coming weeks due to further expectations of increases in feedstock prices. Import prices are expected to increase due to a rise in freight charges. Market participants anticipate that demand for o-xylene from the downstream phthalic anhydride industry might improve in Q2 of 2024.