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China’s self-sufficiency in paraxylene to impact chemical shipping market in 2021

China’s increasing production of paraxylene will reduce imports from South Korea and Japan, putting pressure on freight rates on intra-Asia routes in 2021.

Paraxylene is the second-largest organic chemical carried by chemical tankers. In 2020, paraxylene comprised 17.1% in the total organics seaborne trade. However, trade volumes have been declining since 2018 due to the expansion of Chinese domestic capacity. China is the world’s largest importer of paraxylene but in 2021 paraxylene imports are expected to fall by 10% as the country’s domestic production capacity will grow by 9.8 million tonnes.

China imported 13.9 million tonnes of paraxylene in 2020, accounting for 69% of the total global paraxylene seaborne trade. However, the country’s imports declined by 7.5% YoY as domestic capacity has been expanding since 2019. By the end of 2020, China’s total paraxylene capacity reached 25.4 million tonnes per year. With additional 9.8 million tonnes and 6 million tonnes new paraxylene capacity to start up in 2021 and 2022 respectively, we expect this declining trend to continue in the next five years.

Despite a significant capacity increases China will continue to be a major importer of paraxylene as consumption is increasing on the back of rising production of purified terephthalic acid (PTA). Demand for the latter is growing in polyester fibres, bottle resins, and film.

China’s paraxylene imports from South Korea and Japan slid by 15.7% and 17.6% respectively in 2020 YoY. With capacity additions in China, we estimate paraxylene trade volume from South Korea and Japan to slump by 30% and 15% to 3.6 million tonnes and 1.5 million tonnes respectively in 2021.

Paraxylene exports from Brunei to China will remain stable in 2021 as Brunei’s Hengyi Petrochemical plant, which started operating in 2019, is 70% owned by Chinese PTA producer Hengyi. The plant’s 1.5 million tonnes paraxylene capacity is dedicated to Chinese PTA plants. Meanwhile, India’s and the Middle Eastern exports of paraxylene to China will continue to increase in 2021 with new plants of 0.8 million tonnes in India and 1.4 million tonnes in Saudi Arabia to start up in 2021.

We forecast China’s paraxylene imports to be 12.5 million tonnes in 2021, a fall of 10% from 2020. In turn, the reduced volume of trade will squeeze chemical tanker freight rates on intra-Northeast Asia routes.

(Note: Paraxylene is a feedstock in purified terephthalic acid (PTA) production, which is used to produce polyethylene terephthalate (PET) polymer for the production of polyester fibers. Polyester is vital for China’s textile industry and the success of the textile industry encouraged China to increase PTA units in the past decade. However, China depends on imports for meeting its paraxylene requirements.)
Source: Drewry

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