FocusAsia PTA hits lowest level since July 2003

11 November 2008 17:48  [Source: ICIS news]

By Salmon Aidan Lee

SINGAPORE (ICIS news)--Asian spot purified terephthalic acid (PTA) have slipped to their lowest point in more than five and a half years on very weak downstream polyester market conditions, and the bottom seems nowhere near being reached, buyers and sellers said.

Current PTA spot prices stood at $540-550/tonne CFR (cost and freight) China, a level not seen since July 2003 when prices were just below that range, and a sharp decline from this year’s peak - also a 12-year record - of $1,230/tonne.

And offers had gone as low as $540/tonne CFR China by the close of business on Tuesday, threatening to drag prices even lower as players pondered where the bottom could be for the five-month-old price dive.

“This is perhaps the worst I’d seen, you can say the worst in the past five years,” said a trader with Daewoo Trading, based in South Korea, who added that he was willing to sell even lower given inventories at hand.

“I don’t think the bottom is here yet, as you can see from the downstream market conditions, there’s hardly any strong demand,” said an official from Heng Yi Polymers, a major polyester filament yarn and fibre producer in eastern China.

Although sales of polyester products registered occasional bouts of buyers’ enthusiasm in the past two weeks, they lasted no more than a couple of days, said observers.

“Sales against daily output had dropped since the middle of last week, now we can hardly sell even half of what we produce every day,” said an official with Xiang Sheng Polyester, a polyester filament yarn and chip maker in eastern China.

Operating rates among polyester producers in the key Chinese market had hovered around 70-80% since October, and that suggested that product inventories could be on the rise in view of the lacklustre sales, said market participants.

“Now, some have low inventories of say 10-12 days, but many have higher stocks of almost 20 days and that’s increasing by the day,” said a source from Sheng Hong Polyester, a major filament yarn producer in eastern Jiangsu province in China.

Added an official from Tong Kun group, a leading producer of polyester filament yarns and fibre chips in eastern China: “Soon, you’ll see polyester sellers slashing prices in order to move their cargoes, as we all face a crunch in credit in varying extents amid so much stocks.”

Added an official from Ming Yang Polyester, another polyester filament yarn maker in eastern Jiangsu province: “Once that happens, it’s a goner for PTA [sellers], as prices will surely drop further,” said .

PTA prices “still have grounds to fall further” as the downstream markets weaken, said a trader with Zhejiang Grand Trading, based in Ningbo in eastern China.

“Look at it this way, now PTA producers are able to eke out margins, since feedstock costs for them aren’t too high, and the PTA market is oversupplied,” added the trader.

With supply increasing on the restart of Hualian Sunshine Petrochemical’s lines and the gradual increase in operating rates among PTA makers which had opted for aggressive cutbacks in previous months, some participants believed that the fundamentals would prevail and an oversupplied PTA market would once more bring down prices.

“I think it’s already happening; after two weeks of stability, we see prices falling again, and some traders are even thinking of shorting the market,” said a trader with CJP International in Singapore, who expressed the willingness to sell at $540/tonne CFR China.

“Let’s not deceive ourselves here, as long as crude oil prices fall, PX falls and polyester prices fall, I don’t believe PTA prices can rise, so I’m preparing for even worse,” said a source from Chinese PTA producer Yisheng Petrochemical.

For more on PX and PTA visit ICIS chemical intelligence
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By: Salmon Aidan Lee
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