Material Insights · Understanding the Material World

Crude oil and Paraxylene

Paraxylene is separated from refinery reformate made from crude-derived naphtha, so crude sets its cost and producers earn the paraxylene to naphtha spread, which needs about $300 to 350 a tonne to pay.

Crude oil (energy) and Paraxylene (chemical): 5 relationships.

How they are linked

1. Reformer aromatics

Physical flow · Strong · Crude oil to paraxylene, through heavy naphtha and reformate

Paraxylene is separated from mixed xylenes made mainly in refinery catalytic reformers, which turn heavy naphtha from crude into an aromatic-rich reformate.

Aromatics complexes are built around high-severity reforming of naphtha, which makes toluene, mixed xylenes and benzene as well as hydrogen, so paraxylene plants sit inside or next to refineries. The future supply of heavy naphtha depends on refinery runs, which ties paraxylene to the outlook for crude refining.

Sources: PTQ, Digital Refining; ICIS

2. Paraxylene to naphtha spread

Cost and price · Strong · Paraxylene price minus naphtha cost

Producers buy or make naphtha and sell paraxylene, so the gap between the two is the margin that decides run rates.

  • $287.92/t Asian paraxylene to naphtha spread, 14 August 2024, the low of the year to then
  • about $300 to 350/t spread deemed profitable for most producers, 2024

Below about $300 a tonne most producers lose money, although some can operate on slightly lower spreads. Sluggish Chinese downstream demand and high polyester stocks pushed the spread down in 2024.

Sources: S&P Global Commodity Insights

3. Petrol blending pull

Cost and price · Medium · Petrol demand competes for xylenes

Xylenes are high-octane petrol blendstock, so when petrol margins are strong refiners can blend them instead of making paraxylene.

Traders expected petrol blending to pull paraxylene and other aromatics away from chemical use ahead of the 2024 US driving season, but the pull fell short of expectations. This optional use links paraxylene to the petrol market as well as to crude cost.

Sources: S&P Global Commodity Insights

4. Price link: feedstock cost

Cost and price · Strong · Both ways, crude leads by about a month

Paraxylene starts as naphtha, so crude oil sets its cost floor and its price follows oil over a year.

  • 0.52 monthly change correlation
  • 0.89 12-month change correlation
  • 0.71 fitted elasticity

Yearly moves correlate at 0.89, while the monthly link of 0.52 also reflects polyester demand and Chinese supply. The elasticity below one shows that the spread absorbs part of oil swings.

Sources: Material Insights (World Bank, FRED, IMF data)

5. Refinery-integrated plants in India

Joint production · High in India · Paraxylene made inside refineries

Indian paraxylene is made in refinery complexes that feed their own reformate into it, so refiners choose between fuel and paraxylene for the same streams.

  • 4.2 Mtpa Reliance paraxylene capacity after its 2017 Jamnagar expansion
  • about 11% Reliance share of world paraxylene output, 2017

Reliance's Jamnagar refinery added a 2.2 Mtpa plant in 2017, making it the world's second-largest paraxylene producer at the time. Integration lets a refiner send naphtha and reformate to the higher-value outlet, which can cushion the paraxylene margin.

Sources: Business Standard (IANS)

For investors

Key learnings

  1. Paraxylene is a refinery product: it comes from reformate made from crude-derived heavy naphtha, so crude sets its cost floor.
  2. The paraxylene to naphtha spread is the margin to watch; about $300 to 350 a tonne is deemed profitable, and it fell to about $288 in August 2024.
  3. Integrated refiners such as Reliance can switch streams between petrol and paraxylene, which gives them an edge over standalone plants.

What to track

  • Asian paraxylene to naphtha spread: Below about $300/t signals run cuts by standalone producers (Daily · S&P Global Platts, ICIS)
  • Chinese polyester and PTA operating rates: The main outlet for paraxylene; weak rates push spreads down (Weekly · trade press)
  • Asian petrol cracks: Strong petrol margins pull xylenes into blending (Daily · price reporting agencies)

For policymakers

Key learnings

  1. India's paraxylene sits inside refineries running imported crude, so oil import costs reach polyester textiles.
  2. Refinery integration lets India add value to crude rather than export naphtha, which supports the polyester and PET chain.
  3. Falling petrol demand over the long run could change reformer runs, and so paraxylene supply, at integrated refineries.

What to track

  • Paraxylene and PTA trade balance: Shows whether domestic supply covers the polyester chain (Monthly · Ministry of Commerce trade data)
  • Refinery crude throughput: Sets reformate availability for paraxylene (Monthly · PPAC)

India

Reliance's Jamnagar refinery became the world's second-largest paraxylene producer in 2017, with 4.2 Mtpa of capacity and about 11% of world output.

Sources

  1. Alternative routes to paraxylene production (Axens), PTQ, Digital Refining (2004)
  2. Asian Chemical Connections: benzene production routes to 2040 (John Richardson), ICIS (2021)
  3. Asian PX-naphtha spread sinks to near 18-month low on weak PX demand, S&P Global Commodity Insights (2024)
  4. RIL commissions paraxylene plant at Jamnagar, Business Standard (IANS) (2017)
  5. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data)