Asia PTA uptrend reverses on ample supply

27 July 2007 05:32  [Source: ICIS news]

By Salmon Aidan Lee

SINGAPORE (ICIS news)--Purified terephthalic acid (PTA) spot prices in Asia are pulling back on ample supply and low feedstock costs after just three weeks of gains, buyers and sellers said on Friday.

After a dismal June, prices started to recover in early July, rebounding towards $910-915/tonne CFR (cost and freight) China from $890-900/tonne, before hitting $920/tonne in the middle of the month and finally touching $940/tonne last week.

However, spot deals were being currently being concluded at $920-925/tonne and discussion levels look set to fall below that level in the week ahead, confirming earlier fears of a correction before the end of the month.

"Demand [from end-users] has been slow. We mainly sold to traders and speculators in order to gain higher prices," a trader with Sinochem (Singapore) Trading said.

An official from Formosa Chemical & Fiber Corp, Taiwan’s second-largest PTA producer, agreed, saying "Most of our customers unexpectedly took more than they needed for July, so now the fear is that they may go slow in their procurement for August."

To several market participants, the fundamental oversupply in the Asian PTA market remained the key factor behind the short life of the uptrend.

"I’ve literally so much PTA next door; I don’t think I need worry about not getting the PTA, just perhaps worrying not getting them at the right price," said the procurement manager of South Holdings.

South Holdings owns a 200,000 tonne/year polycondensation unit at Shaoxing. It is located very near Hualian Sunshine Petrochemical, which at 1.8m tonnes/year, is one of the largest PTA suppliers in China.

Low feedstock costs, particularly paraxylene (PX) prices, was also behind PTA weakness.

"With PX dropping, it seems there is little upside to the whole market," a trader with Kolmar Trading said, referring to the PX price fall from $1,170-1,175/tonne CFR Taiwan in mid-July to $1,140-1,145/tonne currently.

A near-term PTA recovery appears far fetched due to the seasonal lull and overcapacity.

"The downstream market might be doing fine, but with the current seasonal lull [for polyester and textile], nobody would be so eager to buy feedstock and encourage prices to rise," an official with Ming Yang Polyester said.

Ming Yang is a mid-sized polyester yarn maker in Jiangsu in eastern China.

"At best, we would selectively buy some to replenish stocks as we go into August, so as to prevent a major price crash which can impact on the prices of our own products," said the procurement manager of Tong Kun group.

"At worst, we’ll ignore any attempts to hike prices, and refrain from buying any for the next few weeks since we’ve got enough anyway," he added.

Tong Kun is one of China’s largest polyester producers.

By: Salmon Aidan Lee
+65 6780 4359

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