FocusAsia PX sellers eye higher prices for May

18 April 2008 05:32  [Source: ICIS news]

By Peh Soo Hwee

SINGAPORE (ICIS news)--Producers and traders expect soaring feedstock costs and tight regional supply to lift paraxylene (PX) prices next month but gains could be limited by a softening derivative purified terephthalic acid (PTA) market, industry sources said on Friday.

Key PX producers had announced a $90-130/tonne (€57-82/tonne) hike for the May Asia Contract Price (ACP) to $1,350-1,390/tonne CFR (cost and freight) Asia compared with April settlements at $1,260/tonne.

The most bullish nomination came from ExxonMobil at $1,390/tonne, while Nippon Oil and Idemitsu’s nominations were at $1,350/tonne and $1,360/tonne respectively, traders and end-users said.

The hikes were in line with hefty increases in raw material pricing. Crude oil prices vaulted to a new record of close to $115/bbl during the week, while naphtha values also hit a fresh high of around $950/tonne CFR Japan in the same period.

Several plant shutdowns in Asia during the first half of the year (see table below) – including an outage at Japan Energy’s Kashima PX unit and a force majeure by Indonesia’s Trans Pacific Petrochemical  Indotama (TPPI) – had encouraged producers to seek higher prices.

“We understand the cost push but the circumstances are not that good. Considering the current PTA prices and weak downstream demand, there is not much room for further increases,” a South Korean producer said.

PTA makers led by energy major BP are seeking to raise April contract prices to $1,020-1,040/tonne CFR China, up $70-90/tonne from March contracts, which were agreed by most PTA buyers and sellers to be settled around $950/tonne.

But ample PTA stocks and the ending of the peak production season at the end of May could thwart their efforts.

“Chinese PTA suppliers still have ample inventories so negotiations with polyester customers have been limited,” a Japanese trader said.

PTA spot prices were traded at $970-975/tonne at the start of the week but slipped $5/tonne to $965-970/tonne by Thursday, according to global chemical market intelligence service ICIS pricing.

This dampened buying interest from PTA producers who retreated to the sidelines as they were put off by PX offers at $1,310-1,320/tonne CFR Taiwan/China for the second half of May.

“We want to buy some spot but we are only looking at purchasing around $1,280/tonne,” said a Taiwanese PTA producer, adding that there was no profit margin by purchasing PX above $1,300/tonne CFR Taiwan.

Buying indications were even lower from Chinese PTA producers, who pegged their price ideas at $1,260-1,270/tonne CFR China based on longer credit terms of 90 days.

As a result, few deals were located during open market trading.

Mid-week, a Singapore-based trader was heard to have sold a 5,000-tonne May cargo to a South Korean producer at $1,315/tonne CFR northeast (NE) Asia but several traders and end-users acknowledged that the deal was above what the broader market could accept.

Separately, three inter-trades were also heard at lower levels of $1,295-1,305/tonne CFR Taiwan/China although further details could not be obtained.

Nonetheless, some traders were optimistic that it was only a matter of time before buyers came round to the realisation that they could not get cargoes at lower levels.

“I have already swopped all my May cargoes to June cargoes so I can wait,” said a Hong Kong-based trader, adding “with naphtha and crude prices increasing, there is no reason for prices not to move higher.”

Key PX planned shutdowns in Q1-Q2

 

Company	Capacity (tonnes/year)	Location	Shutdown period
Nippon Oil	400,000	Oita, Japan	Late Feb to 20 May
Idemitsu Petrochemical	265,000	Chiba, Japan	End-March for 40-50 days
GS Caltex	400,000  (No 2 line)	Yeocheon, South Korea	12 April for one month
Japan Energy	400,000	Chita, Japan	Mid-May to end-June

($1 = €0.63)

By: Peh Soo Hwee
+65 6780 4359

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