Expanding Capacities Raises a Threat of Prolong Oversupply of Mixed Xylene in China

In November, the pricing trajectory of Mixed Xylene asserted to a relatively stable trend but still hovered at the lower end following a sharp decline during October. Multiple factors have contributed to this current market trend. This was primarily due to a confluence of weak demand and an oversupplied market. Despite a brief uptick in crude oil prices, which typically have an influence on petrochemical markets, Mixed Xylene continued its downward trajectory.

However, the slight stabilization in Mixed Xylene prices in the month of November has not yet sparked any enthusiasm amongst the market players as this weak position of largely driven by persistent weakness across key downstream industries, particularly in the PET sector. Alongside low demand, a surge in production output from domestic refineries further exacerbated the oversupply, pushing spot market prices down as traders sought to offload excess inventories.

A major contributing factor to the oversupply of Mixed Xylene was the increase in production capacities within China’s petrochemical sector. Notably, the Yulong Island Refining and Chemical Integration Project, which began its first phase in September 2024, played a significant role. The project, which is set to produce 3 million tons of Mixed Xylene annually, forms part of a broader push in China’s petrochemical industry to expand output. This increased production, along with other newly developed projects, has flooded the market with additional Mixed Xylene supply, further tilting the balance in favour of oversupply and contributing to the sustained price decline.

Additionally, seasonal factors, including the Mid-Autumn Festival, further contributed significantly to the Mixed Xylene price downturn. This period saw reduced consumption, especially in key production areas such as Shandong, and contributed to the weak demand environment. While refineries made adjustments to production levels to manage this drop in consumption, the adjustments were insufficient to counterbalance the larger market trends. The demand from downstream sectors remained lacklustre, keeping prices in a bearish phase for most of the month.

Additionally, the volatile crude oil market also played a crucial role in the Mixed Xylene price shift. While crude oil prices experienced a brief rise, the overall market sentiment remained weak due to geopolitical uncertainties and lower-than-expected global demand. This broader instability in the oil market dampened sentiment within the petrochemical industry, leading market participants to remain cautious and avoid pushing prices higher. As a result, the anticipated upward movement in Mixed Xylene prices failed to materialize.

Further, the ongoing expansion of production capacities of petrochemical commodities such as Mixed Xylene across China, including the large-scale Yulong Island Refining and Chemical Integration Project, highlights the country’s continued investment in its petrochemical sector. These new capacities are poised to significantly increase Mixed Xylene supply, adding further downward pressure to an already weak market. This trend is compounded by China’s strategic focus on the development of industrial hubs such as the Yantai Chemical Industrial Park, which promises to further scale up chemical product output in the coming years.