Paraxylene Prices In Europe Remain Robust Due to Rise in Energy Costs

The price of Paraxylene in the European market has continued to trend positively over the past few weeks, driven by higher energy prices. Despite low demand from the downstream packaging industry, factors such as the increased cost of energy have contributed to the upward movement in Paraxylene prices.

In the European Crude Oil market, tight supply conditions persisted as outages and logistical disruptions continued, limiting consumer access to prompt material. Players observed narrower discount levels for spot material as a result, with prices rising as buyers competed for available material. Furthermore, ongoing attacks by Houthi rebels on the Red Sea have severely disrupted a key shipping route across the Suez Canal, resulting in delays and price increases for the Crude oil upstream. The global container shortage is indeed adding another layer of complexity to the already challenging logistics landscape. This shortage has led to delays and disruptions across various industries, including the oil sector.

Since Russia's invasion of Ukraine, the European middle distillate market has been facing tightness. This situation has led to significant changes in energy flows, particularly with the EU banning Russian crude oil and refined products. As a result, Europe has become more dependent on Asia and the Middle East for energy flows. However, these flows are being affected by the ongoing Houthi attacks in the Red Sea. The attacks have disrupted shipping routes, leading to delays and increased costs for energy shipments to Europe. This situation has further exacerbated the tightness in the European middle distillate market, putting pressure on supply and contributing to higher prices in the region. Overall, the factors affecting the European middle distillate market and energy flows can have a ripple effect on the petrochemical markets, including the production cost of Paraxylene.

In terms of demand, the Paraxylene market faced challenges as fresh orders from potential customers remained weak this week. Additionally, trading activities for Paraxylene in the international market experienced a reduction, primarily attributed to disruptions in ocean routes. Additionally, freight rates from overseas markets have skyrocketed. Market participants note that while the tension in the Red Sea has not directly affected the US, European importers are facing the brunt of the impact. They estimate that the crisis will persist until a solution is found in the Red Sea.

It is expected that Paraxylene prices in the European market will likely be strong in the upcoming weeks. This is due to the impact of rising energy prices and continuous supply disruptions in the Red Sea area. These factors are expected to put upward pressure on production cost of Paraxylene, which may lead to higher prices for Paraxylene in the European market. In German market, the Paraxylene rose by 2.2% at the week ending 9th February 2024.