12 October 2009 07:57 [Source: ICIS news]
By Jeremiah Chan and Loh Bohan
SINGAPORE (ICIS news)--Purified terephthalic acid (PTA) values are poised for a post-holiday fall in the key China market, due to a $200/tonne decline in the October contract settlement of paraxylene (PX) feedstock values, industry sources said on Monday.
The October PX Asian Contract Price (ACP) was settled at $840/tonne (€571.20/tonne) CFR (cost and freight) Asia, between leading producer, ExxonMobil, and two large buyers, BP and Mitsui and Co in the past two weeks. The settlement was $200/tonne lower from September and is the lowest concluded contract price since March this year.
The ACP is typically settled on a preceding month basis and market players usually reference the first concluded price between a major seller and buyer in their own contract negotiations.
Some PX suppliers said the October ACP settlement of $840/tonne CFR Asia was too low and gave the impression that the PTA market was performing poorly.
“The settlement sent out wrong signals to the PTA industry,” said a source at Thai PTA maker, Indorama, echoing similar sentiments from other producers in the region.
Indeed the settled PX contract price was so low that talks between the two other ACP nominators, Nippon Oil and Idemitsu Kosan, and their customers either broke down or remained in a stalemate, and obligated volumes for the month was consequently reduced.
“We understand that the lower PX prices will have to be reflected in our PTA offers,” said a major southeast Asian PTA seller, adding that most buyers were clamouring for lower PTA prices.
One China-based end-user from the polyester sector agreed that PTA prices should be lower, and that he would be reluctant to accept any post-holiday rollover in pricing.
The end-user said he would find it difficult to accept prices higher than the production cost of PTA, which he estimated at $720/tonne CFR China Main Port.
Spot PTA discussions in China about two weeks ago hovered around $780-788/tonne CFR China Main Port, according to global chemical intelligence service, ICIS pricing.
On the contrary, some PTA producers pointed out that the downsides could be limited due to scheduled turnarounds in October at several PTA plants in South Korea and Japan.
“The Chinese polyester producers will also have to restock on fibre intermediates after the holidays. Although the overall mood is still bearish, I don’t think that prices will really crash like some people expected,” an official at a South Korean PTA producer said in Mandarin.
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