06 February 1997 00:00 [Source: ACN]
PARAXYLENE (PX) spot prices soared as traders scrambled to cover short positions because of an outage in the US. However, market players said the dramatic increase in prices was mainly due to panic buying and not the effects of Exxon's allocation plan.
Exxon has put PX customers on 90% allocation, but it is not expected to be felt in Asia until July because of the long shipping time.
One deal was confirmed at US$610/tonne fob Korea, but markets were awash with tumours that prices had gone as high as US$645/tonne cfr Korea. Offer prices climbed to US$650-680/tonne cfr Korea. However, most producers said they have little material available.
Market players are sceptical prices will rise any further. Many said the high prices were mostly psychological.
However, one trader said: 'Sure it is a bit psychological, but what are you going to do about it if you need to buy?'
If PX prices go higher, purified terephthalic acid (PTA) producers who are dependent on spot PX will be forced to cut operating rates, sources said. PTA prices have been stable at US$600-620/tonne cfr Asia, but weakening polyester markets are threatening prices.
Opinions are mixed about how long spot prices can be sustained at this level. Asian markets are expected to remain extremely tight until July, when major PX turnarounds in South Korea will be completed. Asian PX contracts were settled early for Q2 insulating many consumers from the sharp rise in the spot market. Q2 contracts were settled at US$475/tonne cfr Asia or 21.5 cent/lb.
Several factors are responsible for the jump in spot prices, and the Exxon outage was just a trigger, one trader said. Many traders had made short sales in April and May expecting prices to go down, but markets remained tight. Preparations for startups, such as ICI's 450 000 tonne/year PTA plant in Taiwan, and high PTA operating rates have kept material out of the spot market.
Asian PX markets have been very tight since the start of Reliance Industries' 350 000 tonne/year PTA plant in February and Samsung General Chemicals' (SGC) 350 000 tonne/year PTA plant in March. SGC plans to start its 350 000 tonne/year PX in August.
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