UpdateFeedstock fuels Europe Jan OX's €40/t hike

08 January 2008 11:21  [Source: ICIS news]

(adds detail in paragraphs 4, 5, 7, 8, 9, 10, 12 and 13) 

LONDON (ICIS news)--A first European orthoxylene (OX) January contract has been settled €40/tonne up from December at €760/tonne ($1,118/tonne) on rising feedstock naphtha and gasoline costs, a source at a major producer said on Tuesday.

The producer said that the settlement had been made at €760/tonne on a FD (free delivered) NWE (northwest Europe) basis with one customer, and that further contracts should follow this number.

“Based on current feedstock figures, we needed to recover costs,” the source said.

“We need to do it in a two-step settlement. Ideally, we would have liked to settle at an increase of €80/tonne, but we will now have to wait and put through further increases in February.

“The economics [of OX production] were negative because of feedstock costs, but the market is not bad, so there was no reason not to pass through an increase. This still wasn’t a good price for us, and everybody was prepared for it.”

A source at the producer’s contract partner confirmed the increase and final figure, echoing the sentiment that margins had been hit by escalating feedstock naphtha and gasoline costs.

“I guess it’s a surprise because we are all waking up from December,” the source said.

“We were not initially expecting an increase, but producers are suffering from negative margins.”

A second buyer said that it would follow the €40/tonne increase.

As far as further increases in February were concerned, the source said, players in downstream phthalic anhydride would have to wait for January settlements before considering further margin losses or increases on the end product.

Settlements had stalled on a lack of clarity on spot market values for OX and the absence of several key settlers from the market. The producer source hoped that further settlements would be agreed shortly.

Sell-side spot sources were discussing notional sell values of above $1,050/tonne FOB (free on board) Rotterdam on the basis of the contract settlement around $60/tonne above this figure and Asian spot values of $1,020-1,050/tonne CFR (cost and freight) northeast Asia.

Firm spot values were last heard in early December at $920-930/tonne FOB Rotterdam.

($1 = €0.68)

By: Peter Salisbury
+44 20 8652 3214

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