Tight supply, costs propel Asia’s P-wax prices

04 June 2008 05:53  [Source: ICIS news]

SINGAPORE (ICIS news)--Record feedstock costs and tight supply had propelled Asia’s paraffin wax (p-wax) spot prices to new highs, with parcels selling at about 60% more than transactions at this time last year, market players said on Wednesday.

Spot prices for p-wax had remained firm for almost 4 years since Jan 2004 as the battle waged on between high feedstock costs and strong downstream demand.

From being $525-$545/tonne FOB (free on board) China in 2004, the Chinese benchmark 58/60 fully refined solid paraffin wax had since soared to more than triple its price, which is currently assessed at $1,540-$1,560/tonne (€1,001-€1,014/tonne), according to global chemical market intelligence service ICIS pricing.

“The second quarter is usually a low-demand season and spot prices for paraffin wax often decrease during these months”, a China-based trader commented. However, this year it was not the case, he added.

“With crude above $120/bbl, operating margins are down, so producers cannot afford to discount prices”, another China-based seller remarked.

“Moreover, market sources reported that deals in P-wax were usually done on an immediate cash basis in China,” he said, explaining that traders would be afraid if they were landed with storage costs and expensive cargo if they could not locate an immediate buyer.

A market source said it was currently considering other substitutions if P-wax prices were to remain this high. He appended that substitutions might consist of using semi-refined p-wax or part substitution with triple pressed stearic acid which was more stable in pricing.

P-wax producers include PetroChina, Masterank, and Pertamina. P-wax is used in the production of candles, in the food packaging and petroleum jelly industries.

($1 = €0.65)

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By: Heng Hui
+65 6780 4359



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