Chemicals Update: The Transatlantic Market and European Paraxylene

It’s summer again in Europe, and like many other markets, the chemical market has historically been slow during these months. However, the European paraxylene market may be slower than usual, as it continues to face significant challenges impacting both imports and exports.

On the import side, the European market has seen an influx of low-cost paraxylene from Asia, primarily due to abundant supply and subdued demand from downstream industries such as PET and polyester in Europe. In Asia, China is almost fully self-sufficient in paraxylene production, and volumes from Korea, Japan, the Middle East, and India that used to be sent there now have to find another market. This oversupply has driven prices down and created a highly competitive environment, negatively impacting European producers.

A recent drop in the CPP demand has only exacerbated the problem, redirecting feedstock from the production of petroleum products to the production of paraxylene. As a result, westbound exports of paraxylene from the Middle East and India have increased significantly over the last couple of weeks, with most of the product being sent to the US and less to the Mediterranean. This, in turn, has continued to build up pressure on European producers, who find themselves outpriced when they look for markets abroad.

Moreover, European paraxylene prices have been influenced by fluctuating crude oil prices and low feedstock costs. Despite these lower costs, the overall market sentiment within Europe remains weak due to the surplus of product and reduced demand from downstream sectors.

European exports to the US exceeded 250,000 tonnes per year pre-Covid, and as such, made up a sizeable portion of the transatlantic trade. However, in the current market environment, the outlook for European paraxylene exports remains challenging, with no signs of significant improvement anytime soon. This is one of the reasons for the persistent weakness in the transatlantic westbound chemical tanker market this year.

By Plamen Aleksandrov, Market Researcher, Chemicals, SSY.