08 September 2008 05:26 [Source: ICIS news]
By Salmon Aidan Lee
SINGAPORE (ICIS news)--Paraxylene (PX) spot prices in Asia ebbed to their lowest point in six months late last week, with further weakness possible due to poor demand and excess supply, buyers and sellers said on Monday.
PX tumbled $100/tonne week-on-week to close at $1,250-1,260/tonne CFR (cost and freight) ?xml:namespace>
“This is an extremely bearish time, maybe worse than what we’d seen in 2006 and 2007,” said a Singapore-based Korean trader. The past two years saw PX prices plunging for months.
Based on ICIS pricing assessment, PX prices lost more than $455/tonne between mid-July and the first week of September.
A number of market participants believe prices are just correcting from the sharp increases in the first half of this year, in line with the movement of crude prices.
“Crude oil prices rose too fast in the first half [of 2008] and that had artificially pushed PX much, much higher,” said an official from Ningbo Mitsubishi Chemical, a Japanese-owned PTA producer in
“So, in a way, the PX price drop now is also following that of crude oil prices,” he added.
The procurement manager of a major purified terephthalic acid (PTA) producer in
Energy prices had slipped to the lowest level this year – below the $108/bbl level last week on the New York Mercantile Exchange – on abated speculation and concerns that fuel consumption would slow due to the growing economic woes globally.
The massive PTA cutbacks as a direct consequence of squeezed margins for the producers are likely to remain for the rest of September and may prove disastrous to PX suppliers, some market players said.
As many as 14 PTA lines have been shut and 23 lines idled at the shutdown peak in August.
“PX producers are integrated with their aromatics and reformer units, and closely associated with oil product production, so they cannot simply cut back on production just like their downstream customers who are now refusing the PX as [cutbacks] would affect other products’ output,” said a veteran Korean trader who deals in PX, orthoxylene and other aromatics.
PX producers could not easily cut operating rates to stem the price slide as other aromatics products such as benzene and toluene are not so badly hit.
“This is the dilemma to PX producers actually, and it’s just the beginning for them,” said the procurement manager of a major Korean PTA producer, who believed that the PX market would flip into serious oversupply in 2009 and maybe detrimental for PX suppliers’ margins.
“Actually, it’s not only about oil and the upstream, the downstream is equally bad,” said a veteran
The Chinese textile industry had been witnessing slow orders for made-in-China apparels and other textile products, in part due to the disruption to business posed by the Olympic Games in August and rising production costs in
This had in turn affected business in the polyester sector, the largest man-made fibre segment supplying to the textile industry.
“Every month since last year, I’ve had fewer and fewer customers buying my goods. If this continues I would not be able to make any money at all,” said the deputy general manager of a polyester filament yarn producer, Shaoxing Cifu.
Although most filament yarn makers in the key Chinese market were able to eke out gains for the first three or four months of this year, they were barely making it through between May and August, a check with eight producers in eastern
A separate check with six key makers of polyester fibre and fibre-grade polyethylene terepthalate (PET) chips showed that they had been making losses since May.
“It’s not easy at all; each time we ask for higher prices to cover our own costs, our customers simply don’t buy. It’s very difficult to transfer our costs and it’s very difficult to accept high feedstock costs,” said the procurement manager of Jiangsu Senjo, a major polyester filament yarn maker based in eastern Taicang city.
Without support for higher PTA prices, there was naturally no support for higher PX prices, said buyers and sellers.
“The whole [polyester] chain is sick, from PX to PTA right down to polyester and textiles,” said the PX sales manager of a major Western producer, who acknowledged that it would become increasingly difficult to secure buyers for his PX at favourable prices.
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