US o-Xylene prices stabilize in December, clench for a decline in Q1 2024

After experiencing a bearish trend in Q4 2023, Ortho-Xylene (o-Xylene) prices have gained downward stability across the North- American market during the last quarter of 2023. The weak cost pressure from feedstock as well as volatile crude oil prices, and lackluster downstream demand have supported the current price trend of o-Xylene. However, the market outlook for o-Xylene in the first quarter of 2024 remains somewhat gloomy due to the ongoing effects of inflation and high interest rates in industries.  In addition, market players anticipate, demand from the downstream Phthalic anhydride is not likely to improve until the second quarter of 2024.

According to ChemAnalyst, prices of o-Xylene have showcased stability with a marginal decrement of USD 8/MT in the US market during December 2023. The feedstock Naphtha prices have dropped amid weak demand from other end-user industries which resulted in the low production cost of o-Xylene across the domestic market. As a result, manufacturers have slightly revised their offers. In addition, despite geopolitical tensions, including the Israel-Hamas conflict and escalating tension on the Red Sea trade route, crude oil prices have remained subdued due to mid-winter demand outweighing market concerns. This decrease in crude prices has further pressured the manufacturing costs of o-Xylene.

Apart from this, demand for o-Xylene from the downstream Phthalic Anhydride segment has been lukewarm as consumption from the construction sector has softened amid economic headwinds including persistent high inflation and interest rates coupled with low seasonality which dampened the prices of o-Xylene across the domestic market. Overall, full-year sales for 2023 came in at 4.09 million units. In addition, the U.S. central bank held its policy rate steady at 5.25-5.50% and signaled an end to the historic tightening of monetary policy over the last two years, with lower borrowing costs anticipated in 2024. The Fed is also expected to cut interest rates next year, which could reduce consumer borrowing costs and potentially boost economic growth and buying capacities of the end-use industries. Meanwhile, inquiries from the overseas market have also been subdued in recent months as macroeconomic challenges continue to keep consumer spending at bay. In addition, US o-Xylene manufacturers face difficulties in raising export prices as buyers find it difficult to stomach. Overall, the availability of finished stock of o-Xylene was reported on the higher side in the domestic market. As a result, prices of o-Xylene FOB Texas were settled at USD 982/MT during the same time frame.

Looking ahead, o-Xylene prices might decline in the first quarter of 2024 as demand from the downstream Phthalic Anhydride could face headwinds from a slow residential construction market. The cost pressure from feedstock Naphtha is anticipated to ease as its prices might settle on the lower end in the given time frame. On the other hand, major manufacturers of o-Xylene might reduce their operating rate in anticipation of a deep freeze across the domestic market. Furthermore, the recent logistic disruption brought on by the Red Sea attack coupled with prolonged drought in the Panama Canal is unlikely to negatively impact the o-Xylene supply due to lower demand as a result of seasonality, along with economic headwinds including elevated interest and mortgage rates, as well as lingering high inflation. Despite this, the material availability is expected to remain sufficient. However, market players speculate demand for o-Xylene could pick up in the second quarter of 2024 which might raise the prices of o-Xylene across the domestic market.