JXTG to cut PX production by up to 20pc

Japan's JXTG Nippon Oil & Energy, the world's largest merchant seller of paraxylene (PX), plans to cut production of the product by up to 20pc in response to squeezed margins.

The production cuts of 10-20pc will be implemented "as soon as possible" and will be achieved by reducing operating rates at reformers and toluene disproportionation (TDP) units, as well as PX facilities, a company official said. The official declined to specify which sites would be affected.

JXTG operates 11 PX units across Japan with the combined nameplate capacity to produce up to 3.12mn t/yr of the fibre intermediate feedstock. It also has a 50pc stake in the 1mn t/yr Ulsan Aromatics (UAC) complex in South Korea, a joint venture with SK Global Chemical.

A 20pc production cut would imply an output reduction of more than 720,000 t/yr. JXTG's benzene production will fall by a similar extent because of the cuts in PX rates. The company has 1.95mn t/yr of benzene production capacity in Japan, as well as offtake of 300,000 t/yr from the UAC joint venture, indicating a 20pc cut would reduce output by up to 450,000 t/yr.

PX production margins have fallen sharply in the last two months because of oversupply, dropping by about 45pc from $590/t in early March to $330/t on 25 April, according to Argus data. PX producers typically require the product to be at a premium of around $300-350/t to naphtha to cover costs and break even.

But JXTG's decision to cut production has been prompted by negative margins for benzene, as well as the weakness in PX. Benzene's premium to naphtha has been consistently below the minimum breakeven level of $150/t since December because of a severe glut in supply. The naphtha-benzene differential averaged just $35/t last week.

The Asia-Pacific aromatics market is facing an extended period of oversupply as new Chinese production comes on stream this year. Private-sector Hengli Petrochemicals has already started production at one of two 2.25mn t/yr PX units at its new Dalian refinery and petrochemical complex and is expected to begin production from its No.2 unit in June.

Fellow private-sector Chinese firm Zhejiang Petrochemical (ZPC) is likely to bring its 4mn t/yr No.1 PX unit on stream in the second half of 2019, while state-controlled Sinopec is expected to start production from its new 1mn t/yr plant on in the southern province of Hainan in July-August.