FOCUS: Euro Jan PA contracts set to fall

11 January 2006 13:51  [Source: ICIS news]

By Geraldine Gilmartin

LONDON (ICIS news)--European phthalic anhydride contracts for January will fall but will not reflect the full drop this month in orthoxylene (OX) feedstock prices, PA buyers and sellers said on Wednesday.

Although the January OX contract fell by Euro70/tonne to Euro700/tonne free delivered (FD) Northwest Europe (NWE), PA January prices are likely to drop by only about Euro50/tonne, producers and consumers said. Fourth quarter PA prices were settled at Euro950-1,000/tonne FD NWE.

Discussions on January PA contracts were continuing on Wednesday and settlements are expected by the end of the week.

OX prices were settled on a quarterly basis until the end of 2005 when the market went monthly. The first monthly contract, for January, was agreed on 21 December. The quarterly PA price has disappeared as a result and PA players are adapting their pricing arrangements accordingly.

“Everybody needs to adapt to the new system with OX – it is a learning process,” said one seller.

One PA producer said that it has not given away the full OX drop in formula-related contracts but has actually improved margins by Euro20/tonne. Many PA contracts use formulas relating to OX, with the PA price automatically set at a premium to OX.

PA spot prices were assessed this week by global price reporting and market intelligence service ICIS-LOR at Euro880-950/tonne free delivered NWE, about Euro 50-70/tonne softer than December, on the back of the fall in OX. Supply remains tight, but not as critical as it was during the fourth quarter.

By: Geraldine Gilmartin
+44 20 8652 3214

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