Asia PX Dec ACP still unsettled, focus on quarterly

10 December 2007 16:54  [Source: ICIS news]

SINGAPORE (ICIS news) – The Asian contract price (ACP) for December paraxylene (PX) remains unsettled and looks set to remain that way for the rest of the week, buyers and sellers said Tuesday.

About a month ago, ExxonMobil, Nippon Oil and Idemitsu Kosan proposed selling their December PX respectively as $1,200/tonne CFR (cost and freight) Asia, $1,210/tonne and $1,250/tonne.

The deadline for a settlement was supposed to be 30 November, but as of Monday evening, no settlement had emerged.

“This is very unusual, as usually the ACP gets settled around the end of the preceding month,” said a consumer in China, which operates a 1.66m tonne/year purified terephthalic acid (PTA) line in Zhejiang province.

However, due to squeezed margins for PTA producers downstream, buyers were unwilling to accept a settlement above $1,100/tonne CFR Asia.

On the sell-side, due to crude futures touching almost $100/bbl earlier in November, and lofty naphtha and isomer xylene numbers for the most of the past month, PX producers were looking to compromise at no lower than $1,140/tonne in order to avoid losses.

“The wide gap between buyers and sellers basically rendered any negotiation to be meaningless,” said a Singapore-based trader who sells regularly into the Taiwanese market.

“I think a few of us tried our best, but nobody would like to take the lead and come up with a settlement, as the buy-sell gap was just too wide,” said the procurement official from a major buyer in Taiwan, who added that talks were still ongoing.

With the deadline passed, PX producers have the option to renominate their December ACP. However, none has done so, as most of them were still holding on to the tacit hope that a settlement based on the original nominations would emerge soon.

But few people seemed to be banking on that. “We’re assuming that there is going to be no settlement for December, and instead it would be a quarterly settlement,” said an official from another Taiwanese end-user.

PX buyers pay for their contract feedstock on a quarterly basis, based on the average of the three monthly ACP settlements of the relevant quarter.

“Without a monthly settlement, now we just see how the quarterly settlement would turn out to be, but that would again take a long negotiation process,” said the Chinese PTA maker.

The ACP settlements for October and November were respectively $1,045/tonne and $1,080/tonne CFR Asia.

Most buyers and sellers expect the average of the October, November and December - the settlement for the fourth quarter - ACP to be lower or on par with the average spot prices for the same period, around $1,090/tonne CFR Taiwan.

Based on such an assumption, buyers and sellers felt that the December settlement could work out to be $1,140/tonne CFR at the highest.

By: Salmon Aidan Lee
+65 6780 4359

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