23 March 2009 05:31 [Source: ICIS news]
By Salmon Aidan Lee
SINGAPORE (ICIS news)--Asian purified terephthalic acid (PTA) spot prices could continue rising to breach $800/tonne (€592/tonne) in the next few weeks on the back of strong demand amid tight supply and a surge in feedstock costs, buyers and sellers said Monday.
Traders and speculators bought PTA for prompt arrival for as high as $760/tonne CFR China last week, while end-users concluded deals at $750-755/tonne CFR China on 20 March, up from around $700/tonne two weeks ago, market sources said.
PTA spot prices hit as high as $790-800/tonne CFR China in mid-February and then pulled back a little before resuming their uptrend last week.
“We need the PTA. (We have) no choice as we would need to keep production going well into April or even in May,” said a source from Zhejiang United Fiber, a mid-sized filament yarn and fibre chip producer based in Shaoxing in eastern ?xml:namespace>
“We don’t have extra capacities to supply to the market, just enough for our contract customers and we actually had to buy some spot PTA last week to supply to one of our customers,” said a source from Ningbo Mitsubishi Chemical, a Japanese-owned PTA maker based in eastern China.
Surging feedstock paraxylene (PX) costs at $950-960/tonne CFR Taiwan in the spot market and $920/tonne CFR Asia for April contract may push PTA prices beyond $800/tonne CFR China in a few weeks, traders said.
“We seemed to be too pessimistic earlier this year as many people thought the [global recession] will hurt demand. But the highest price (this year) for PTA was seen in February," said a source from Xiang Sheng Polyester, a mid-sized producer of polyester filament yarns and fibre chips based in Xiaoshan in eastern China.
Traders and producers said most polyester makers were determined to continue with prevailing operating rates of around 75% of nameplate capacity despite losses because of financial incentives associated with keeping the plants running at those levels.
“This year, the credit controls are essentially gone and banks are not pressured to seek prompt repayment of loans,” said a trader with Zheng Kai International, a Xiaoshan-based company.
The Chinese government has given generous financial aid through a stimulus package to spur growth.
“In fact, if we do not produce, the banks may get more jittery and come asking us to repay the loans and that could be the end for us,” said a source from Zhejiang Cifu, another major polyester maker in Shaoxing.
“As long as we do not bleed too much, we should be keeping our operations going,” said a source with Sheng Hong Polyester, a leading producer of polyester filament yarns at Wujiang in eastern
Because polyster makers had incentive to continue production, demand for PTA – and monoethylene glycol – should continue to remain strong according to traders.
“There are some turnarounds of (PTA) plants in April, and we have such high PX costs, we’d likely maintain (strict price discipline), especially since our (PTA) inventories are not high,” said a source with Formosa Chemical & Fiber Corp, a major Taiwanese PTA supplier.
Since last week, polyester sales has picked up once again, with some of those in eastern China reporting daily sales-output ratio of 200% for three consecutive days between last Wednesday and Friday, market players said.
“Some good news such as improved fabric sales and more orders for (made-in-China) garments from international buyers has boosted the sentiment," said a source from Sinopec's East China sales office. "So little bit of losses on polyesters should not dampen the mood too much.”
($1 = €0.74)
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