Long term toluene contracts fall in China

17 April 2008 05:33  [Source: ICIS news]

HONG KONG (ICIS news)--Chinese importers of toluene have reduced their long term contracts in 2008 on increased domestic capacities and the growing divide between international and domestic prices, said a trader at the CBI International Aromatics Industrial Chain Conference.

International contracts were usually on a FOB (free on board) Korea basis.

An increase in domestic capacities was the main reason for this fall in import demand, he said and secondly, long term contracts on an FOB Korea basis would not be in accordance with China's domestic market situation.

"It was heard that some company in South China had signed 2008 contract with a Korean company, while most traders did not extend contracts," he said.

This is in contrast with 2007 when the following five companies had signed contracts- Ningbo Huahui, Dongguan Topship Chemical, Southern Petrochemical, Huarun Chemical and Haijun Chemical.

In November-December 2007, import prices were yuan (CNY)1,000-2,000/tonne ($143-286/tonne) higher than domestic market prices.

Sellers wanted to use FOB Korea as the price benchmark while buyers were insistent on EXW (ex-works) or refinery prices, he said.

"Suppliers and importers failed to agree...[as] FOB Korea prices cannot indicate the domestic market prices," he said.

Looking ahead, the emergence of FOB China assessment could be a solution in the future, if CFR (cost and freight) China prices also fail to represent the market fairly, he added.

Lastly, a number of government regulations introduced in recent times have affected the Chinese market prices, he said.

The two-day International Aromatic Industrial Chain conference in Hong Kong will run through 17-18 April.

($1 =CNY6.99)

By: Mahua Chakravarty
+65 6780 4359

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