FocusAsia spot PTA targets $1,000/t this week

12 May 2008 04:32  [Source: ICIS news]

By Hong Chou Hui 

SINGAPORE (ICIS news)--Asian purified terephthalic acid (PTA) values are poised to breach the psychological $1,000/tonne cost and freight (CFR) China mark this week, boosted by record high crude futures, producers and traders said on Monday.

Crude oil for delivery in June closed at $125.96/bbl (€81.87) on Friday on the New York Mercantile Exchange (NYMEX) as a combination of hedging against a weaker dollar and instability in Nigeria exerted upward pressure on prices.

“Prices for feedstock paraxylene (PX) have been moving up because of crude. So, it’s no surprise that some PTA sellers are trying to make use of this to go for the $1,000/tonne mark,” a northeast Asian trader said.

PX values rose in tandem with crude futures, with prices firming by $50/tonne to $1,300-1,315/tonne CFR Taiwan for the week to 9 May from $1300-1,365/tonne on snug supply and dearer naphtha, based on global chemical markets intelligence service ICIS pricing.

A spot deal for PX at $1,405/tonne CFR Taiwan was concluded on Thursday but this was widely dismissed by industry sources as a speculative trade unrepresentative of true market levels.

The seller was heard trying to bid for spot PTA above $1,000/tonne CFR China on the same day, said producers, traders and end-users.

“Obviously, they’re trying to move up the PTA price so that it supports their PX sale. This is their way of convincing the market that price levels should be moving up,” said the same northeast Asian trader.

PTA values were firmer by $8-11/tonne to $988-996/tonne CFR China for the week to 9 May from $980-985/tonne the previous week.

The prospect of spot PTA prices crossing into four-digit territory was welcomed by Asia’s PTA contract suppliers who nominated their April cargoes between $1,020-1,040/tonne CFR China.

“The buyers refused to bid above $990/tonne CFR China for our contract molecules so we sold our PTA on the spot market,” a source from a major northeast Asian maker said in Mandarin.

“The suppliers who are still negotiating their April contracts could have a serious shot at settling above $1,000/tonne if spot PTA prices continue to firm,” he added.

Major PTA suppliers across Asia such as BP, Mitsubishi Chemical and Zhejiang Yisheng have shut down lines or reduced production in light of stalling contract talks and firming PX values.

Chinese polyester makers, however, said that they were willing to match PTA suppliers blow-for-blow by cutting output at their own facilities.

A tepid performance by China’s downstream polyester sector which accounts for 70% of the country’s PTA imports at the recently-concluded China Import and Export Fair, however, left some downstream end-users sceptical of gains.

“We’re absolutely not venturing above $990/tonne CFR China if we bid for PTA. Only the traders are bidding above $1,000/tonne,” said a source from polyester maker, Zhejiang Lianda, in Mandarin.

The poor state of China’s downstream polyester sector was further illustrated by major Chinese manufacturers such as Xiamen Xianglu and Zhejiang Hengyi revealing that they had inventories of close to a month sitting in their respective warehouses.

“Zhejiang Hengyi shouldn’t have so much inventory on its hands because it has agreements with many downstream garment and textile makers who always utilise its polyester products,” said a source from a Taiwanese PTA maker in Mandarin.

“This is the surest sign yet that China’s polyester sector is really on its knees,” he added.

PTA is a major feedstock for Chinese polyester makers and accounts for almost two-thirds of the raw material in the polyester production process, said industry players

($1 = €0.65)

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By: Hong Chou Hui
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