Asia PX jumps to six-month high above $1,000/tonne

07 April 2009 06:38  [Source: ICIS news]

By Salmon Aidan Lee

SINGAPORE (ICIS news)--Asian paraxylene (PX) spot prices crossed $1,000/tonne (€750/tonne) for the first time in six months, boosted by strong demand, tight supply and recent gains in crude oil futures, buyers and sellers said on Tuesday.

As of Monday evening, PX prices had spiked to $1,030-1,035/tonne CFR (cost and freight) Taiwan, levels not seen since early October 2008 according to global chemical market intelligence service ICIS pricing.

The prices were up $10/tonne from last Friday’s close and $80/tonne higher compared to a week earlier.

“Demand remains very strong. I have regular enquiries from end-users in Taiwan, Korea and China but suppliers have been slow to offer,” said a PX broker based in Japan.

“I bid around $1,030/tonne [CFR Taiwan and/or China] for May PX yesterday evening, but my (potential seller) insisted $1,050/tonne,” said a trader with Macau-based Winsway Trading.

End-users in China were the most aggressive, buying spot material for as high as $990/tonne CFR China for April and May about two weeks ago and are now looking to buy at around $1,010-1,020/tonne, market sources said.

PX is a feedstock for purified terephthalic acid (PTA) production, which are mostly used in making polyesters.

The lack of PX supply has been keeping most PTA facilities in China running at very low operating rates, while the others had to shut operations.

PTA prices has been tracking the movement of PX in the past few months, hitting $840-850/tonne CFR China last Friday, compared to around $680/tonne in mid-March and coming from a low of $520/tonne in November last year.

“Margins for PTA makers are very comfortable, and this is one thing we must take advantage of and produce more to meet our customers’ demand,” said a source from Oriental Petrochemical (Taiwan), a mid-sized PX end-user which produces purified terephthalic acid (PTA).

Based on contract PX prices of $830-880/tonne CFR Asia between March and April, margins for PTA makers could be as much as $140-150/tonne for these months, according to market participants.

As such, most PTA producers including Hyosung Petrochemical, Taekwang Industrial and Samsung Petrochemical had postponed their scheduled plant shutdowns this month to a later date, boosting demand for PX.

Meanwhile, firm crude oil and naphtha futures in the past week also helped boost aromatics prices, including PX, said market players.

Oil prices rose towards the $55/bbl level last week from below $50/bbl a month ago, while naphtha values edged up to $480/tonne CFR Japan from just slightly above $400/tonne in early March.

“Then we saw the downstream sectors doing well, and PTA futures pricing (at the Zhengzhou commodity exchange) followed suit and so PX prices simply rose,” said a trader with Jinshan Associated Trading, the trading arm of Shanghai Petrochemical Co, a Sinopec flagship.

Downstream polyester producers had been reporting brisk business in the past two weeks as most filament yarn grades’ prices rose significantly and makers flipped from loss-making in February to profitability by mid-March.

“What to do, now filament yarn makers are making money and we all just need to chase (after) the PTA price rise,” said an official from Jiangyin Hua Hong Polyester, a small-sized polyester staple fibre producer in eastern China.

“As long as the downstream markets remain this good, demand for PTA would be strong and consequently, demand for PX would be strong too,” said a source from Zhejiang Yuan Dong Petrochemical, a major PTA supplier in China, who quoted PX buying ideas of around $1,010/tonne on a CFR basis on Monday.

But the rising PX values may continue only up to around May, when the tight supply would ease as new capacities start up in China, market sources said.

“PX producers are in general very cautious, and they dare not increase their operating rates too much in case they are caught off-guard again with a sudden crash in (downstream) prices,” said a source with Mitsui & Co, a leading Japanese trading house.

($1 = €0.75)

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By: Salmon Aidan Lee
+65 6780 4359

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