FocusAsia PTA eyes $1,000/t after China fair

08 April 2008 04:40  [Source: ICIS news]

By Hong Chou Hui

SINGAPORE (ICIS news)--Asian purified terephthalic acid (PTA) values may cross the psychological $1,000/tonne (€640/tonne) CFR (cost and freight) China mark next week when deals are made after the China Import and Export Fair,  producers and traders said on Tuesday.

Prices last breached the $1,000/tonne level in October 2006.

The China Import and Export Fair - widely known as the Canton/Guangzhou Fair - is a barometer of export orders from the country in the coming months and the 103rd edition of the event will take place on 15 April.

PTA makers, led by energy major BP, have announced their contract nominations for April in the range of $1,020-1,040/tonne amid higher feedstock paraxylene (PX) selling ideas at $1,330/tonne, market sources said.

“The PTA majors are pretty confident that they will be able to settle close to their desired price levels after the China Import and Export Fair,” a source close to Taiwanese PTA maker Formosa Chemicals and Fibres Corp (FCFC), said in Mandarin.

“This is due to an expected rush of orders from the event on the back of summer peak demand in export markets such as the US and Europe,” he added.

FCFC has an annual PTA capacity of 1.67m tonnes, with an additional 400,000 tonnes due online by the middle of 2008, company sources said.

March contract settlements for PTA in Asia are expected to be settled around $950/tonne soon, buyers and sellers said.

PTA sellers’ optimism was further fuelled by rosy sales-to-output ratios of 100-120% for the downstream polyester sector in March.

Leading the charge was polyethylene terephthalate (PET) bottle chip prices from China.

They firmed by $40/tonne (€25.20/tonne) to $1,370-1,410/tonne free-on-board (FOB) China for the week to 28 March from the previous week’s $1,330-1,370/tonne, based on global chemical markets intelligence service ICIS pricing.

However, expectations of the PTA price hike could be tempered by a possible drop in orders for downstream polyester textiles and garments, which fell by 9% to $3.02bn in the last edition of the Canton Trade Fair in October 2007.

Talk of a US recession could slow import orders from China, with the head of the US Federal Reserve, Chairman Ben Bernanke stating last week that the country could already be in a recession.

Coupled with the US sub-prime credit crisis which began in the last quarter of 2007 and the loss of 80,000 jobs in March, this could have a negative impact on summer’s peak demand from China’s key export market, some PTA end-users said.

The downstream polyester textiles and garments is also worried as overseas orders for such products contracted by 0.54% to $1.84bn from 2007 at the recently concluded East China Trade Fair in Shanghai, according to statistics from the event organiser’s webpage.

The East China Trade Fair is widely considered as an accurate yardstick by the Chinese polyester industry to gauge market sentiment before the Canton Trade Fair,  industry sources said.

The Canton Fair is held twice a year in the southern province of Guangdong. Other Chinese major exporters of consumer products also head to the fair, which is considered one of the world's biggest.

Major PTA suppliers in Asia are Mitsubishi Chemicals, Mitsui Chemicals and Samsung Petrochemical.

PTA is used to make polyester fibres and yarns and polyethylene terephthalate (PET) chips.

Echo Han and Windy Hu from CBI contributed to this article.

($1 = €0.64)

By: Hong Chou Hui
+65 6780 4359

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