MEG, PTA sellers looking beyond China after sharp price fall

04 May 2005 05:15  [Source: ICIS news]

SINGAPORE (CNI)--The recent steep falls in Chinese purified terephthalic acid (PTA) and monothylene glycol (MEG) spot prices have prompted suppliers to sell their product to other parts of Asia, and even to the US and Europe, traders told CNI on Wednesday.

In the past month, PTA prices have fallen as much as $90/tonne to last week’s $750-755/tonne CFR China. MEG prices have plunged around $200/tonne to last week’s $780-790/tonne CFR China in the same time period.

But in the US, PTA prices are hovering above $900/tonne on a delivered basis, while MEG spot prices are as high as $1,100/tonne on a delivered basis. European prices have suffered more from the negative influence from Asia, but both PTA and MEG prices in Europe are still at least $100-150/tonne higher than the Asian values.

Some traders with long positions were heard to trying to move cargoes to less active Asian markets, such as India, Indonesia, Thailand and even Australia. But high freight rates have so far blocked the cargo flow to those countries.

Buyers in these countries have been gradually increasing their buying ideas in the past few weeks, leading market watchers to believe that suppliers with high inventories would soon overcome the logistics barrier and move cargoes to these markets.

As of Tuesday, some Indian and Australian buyers were said to be negotiating with suppliers for about 5,000 tonne of PTA and 2,000 tonne of MEG, for late-May and early-June delivery. Some deals could emerge as early as later this week.

Meanwhile, the steep price falls in Asia have also opened the arbitrage window for Asian sellers to move cargoes to the US and Europe.

At least three traders with rising inventories are offering to sell about 5,000 tonne of PTA and MEG each to traders active in the US Gulf.

At the same time, an Indian MEG producer, who usually sells his excess volumes of about 10,000 tonne to China, has also started offering them to Europe and the Mediterranean countries.

Market observers said this trend could persist in the next few weeks, as prices for the two fibre intermediates are expected to fall even lower in China after the week-long Labour Day holidays end on 7 May.

In fact, given poor market conditions in the downstream polyester sector and falling feedstock paraxylene and ethylene costs, the price downtrend could continue until at least mid-June, said participants. This could then encourage more arbitrage activities.

By: Salmon Aidan Lee
+65 6780 4359

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