Europe waits for Jan PX, mulls devolution from ACP

08 January 2008 17:46  [Source: ICIS news]

By Peter Salisbury

LONDON (ICIS news)--European paraxylene (PX) market participants discussed future market dynamics on Tuesday as for a second month contracts remained unsettled due to an impasse over the Asian contract price (ACP).

“I think it all goes back to Asia,” said a buyer source at a major purified terephthalic acid (PTA) producer on the delayed January settlement in Europe.

“Over there, PX producers have introduced cost increases which buyers cannot implement in the PTA market. In Europe, [which has traditionally followed price movements in Asia], it goes to the issue of ‘We will not settle’.

“I could see the European contract price settled before the ACP again. Contracts over here have a deadline, which is closer to mid-month, after which things go to a formula," the source added.

“That’s why no-one had been in a rush to settle, but after the 10th [of January] there will be a lot of people seeking settlements.”

Many buy- and sell-side market participants echoed these sentiments, with producers saying that some market participants were yet to even enter into negotiations.

Another difficulty was the lack of nominative ideas from producers, as they watched both the European spot and Asian contract market with interest, several consumer sources said.

“No-one wants to come out with a number,” said a buyer at a dimethyl terepthalate producer. “There will be a number because Europe needs one. It will need to be settled before the 14th."

The buyer went on to say that if Asia did not settle in this time, there would be a second separate monthly settlement, and this could set a precedent for future negotiations.

“Consumers and even some producers are not entirely happy with just taking Asian numbers and putting them through the exchange rate,” the source said.

“There is some discussion of making European contracts a separate thing.”

This was, the source said, compounded by the stress of the delays Asia was now causing Europe.

Producers were widely thought to be targeting increases on December PX settlements of €722/tonne ($1,061/tonne) FD (free delivered) NWE (northwest Europe) on the basis of ongoing energy complex strength, but buyers were likely to reject these despite recent NYMEX crude trading at as much as $100/bbl.

At 16:30 GMT, Europe spot PX bids were heard at $1,050/tonne FOB (free on board) Rotterdam with no firm offers noted. Market participants declined to comment on what effect this might have on contract negotiations.

Spot had risen some $25/tonne on Monday, with a deal reported at $1,055/tonne FOB Rotterdam, trade selling industry.

($1 = €0.68)

By: Peter Salisbury
+44 20 8652 3214

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