Asia Nov/Dec PTA settles late on poor demand

03 March 2008 05:53  [Source: ICIS news]

SINGAPORE (ICIS news)--Purified terephthalic acid (PTA) November and December 2007 prices finally saw a settlement with the former rising $10-20/tonne (€7-13/tonne) over the October settlement after months of protracted negotiations due to PTA overcapacity, buyers and sellers said on Monday.

November and December prices were settled at $850-860/tonne and $850-855/tonne CFR (cost and freight) China respectively they said adding that the emphasis was not so much on the increase in prices but on the extended period of time taken to settle.

“The monthly prices should actually be settled at the end of every month, but because of oversupply, because of poor downstream demand and because of volatile spot prices, we were unable to agree to a price for a long time,” said a trader who handles Japanese and southeast Asian material.

“Customers said that spot prices were actually as low as $820-830/tonne by end of November, and actually dropped further in December, so some of them actually simply refused to take any December volumes because we insisted on this price,” a source from Hyosung Corp, a mid-sized producer in Korea, said.

Market players agreed that the tough and protracted negotiations were mainly due to overcapacity in the PTA sector, and lacklustre conditions in the derivative polyester segment after secondary feedstock monoethylene glycol (MEG) also rose sharply, squeezing margins for polyester producers.

“But now, demand had improved and supply was reduced by production cuts in the past two months, so things got better and they were more willing to settle,” said a source from Samsung Petrochemical Co, another Korean PTA maker.

Yet, some end-users disputed these settlements, saying that they did not take any December cargoes.

“We did not buy any for December, and the November settlement was not fair,” said an official with Jiangsu Heng Li Polyester, a major polyester yarn producer in eastern China.

“We agreed to the November price because we saw the [futility] of arguing further, especially now we need the PTA desperately,” said a source from Dragon Special Resins, a Fujian-based bottle chip maker.

“December, there was actually no price for us, but the settlement was for the good of the broader market,” the source added.

($1 = € 0.66)

By: Salmon Aidan Lee
+65 6780 4359

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