Lukewarm Downstream Demand and Ample supply weigh on the US ortho-Xylene Prices

Texas, (US): Ortho-xylene (o-xylene) prices have witnessed renewed downward adjustments across the US market during the second week of June 2024 in response to the weak market conditions. The cost pressure from raw materials has also eased, which has weighed down the prices of o-xylene. Additionally, weak downstream derivative demand coupled with comfortable material availability has further prompted manufacturers to revise their o-xylene offers in the regional market.

According to ChemAnalyst's latest database, o-xylene prices have declined by USD 10/MT on a weekly basis in the US market. The upstream Mixed Xylene prices have persistently dropped amid weak demand dynamics, resulting in lower production costs for o-xylene in the domestic market, contributing to a bearish market sentiment among manufacturers.

Moreover, manufacturing firms have slightly reduced their operating rates in the domestic market to balance the underperforming downstream demand. Market participants report that o-xylene availability was relatively sufficient to meet existing demand. On a positive note, the Panama Canal Authority (ACP) will increase the number of daily transits from 32 to 33, effective July 11. Additionally, this number is projected to increase to 34 by July 22, influenced by the anticipated levels of Gatun Lake in the coming weeks and the arrival of the rainy season in the Panama Canal watershed. Moreover, an increase in the draft from 13.7 m to 14 m was announced, effective June 15.

Additionally, domestic demand for o-xylene from the downstream Phthalic anhydride industry has been muted amid slow consumption from the end-user construction sector, contributing to the downward trend in prices. Data shows that new home construction in the US slumped in May to the slowest pace in four years, as higher interest rates have dampened the housing industry’s momentum from earlier this year. Housing starts fell by 5.5% in May to 1.277 million units, reaching their slowest annualized rate in four years.  Weakness was broad-based, with declines seen in both single and multifamily starts. Forward-looking permit activity was also soft, indicating builders are less optimistic about prospective demand given persistent inflation and a higher interest rate environment. On the other hand, the Federal Reserve recently specified that it will not cut rates until later this year, meaning mortgage rates are unlikely to decrease from the 7% rate they have hovered around since late last year. Meanwhile, inquiries from overseas markets, notably Latin America and Mexico, have also deteriorated amid economic uncertainties and adverse weather conditions, which have dampened end-user consumption. Thus, prices of o-xylene FOB Texas were settled at USD 1080/MT during the week ending June 14, 2024.

In the short term ChemAnalyst anticipates, that prices of o-xylene are not likely to increase in the US market in the backdrop of further decline in demand from the Phthalic anhydride industry. Furthermore, the construction sector is not expected to recover in the near term amidst inflation and high interest rates. At the same time, raw material prices might decrease which may further ease the prices of o-xylene.