19 January 2010 05:52 [Source: ICIS news]
By Bohan Loh
SINGAPORE (ICIS news)--Asia’s paraxylene (PX) market turned bearish on the third week of the new year as spot purchases from its main downstream – the purified terephthalic (PTA) sector – skidded to a halt amid sufficient inventory, industry sources said on Tuesday.
Initial expectations of strong PX prices to last through March due to tight supply were being dashed because of ample volumes, they said.
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Kuwait Aromatics declared a force majeure on PX supply last week due to an outage at its 820,000 tonne/year facility in Shuaiba. CNOOC-King also has an outage of its 900,000 tonne/year PX plant in Huizhou on 9 January.
“I realised that there has been little to no impact on prices this week as PTA makers have more than enough inventory for February,” said a source from a leading Korean PX producer.
Some PTA makers could have secured additional cargoes back in December last year on fears that negotiations for term supply in 2010 could either be stalled or delayed amid an uptrend in PX prices, said the Sinopec source.
PX prices were on a firm uptrend at the beginning of the year, gaining almost $50/tonne (€34.5/tonne) in the first week of trade in 2010, but subsequently weakened back to end-2009 levels. Values were assessed at $1,115-1,125/tonne CFR (cost and freight)
“I still see some deep-sea material that was brought over from Europe and the
There still remained some unsold volumes of PX for February delivery, said a trader with a Korean trading house LG International. “I’m really worried for the March market now,” he said.
“Traders might roll over their February cargoes and try to sell it in the March market and the market becomes flooded with more than enough material again,” the trader said.
Despite the overall bearish sentiment in the region, some market players said that prevailing strong naphtha valuations, coupled with healthy margins in the downstream PTA market would prevent any downward spiral in PX prices.
Naphtha prices in the region soared to $739/tonne CFR (cost and freight)
“If naphtha remains in the mid-$700/tonne range and PX drops below $1,100/tonne, producers will definitely start cutting back on PX production. Considering current PTA spot prices, end-users can surely afford prevailing PX costs,” said the source from Sinopec.
According to estimates by market sources, PTA makers were still enjoying a margin of $65-95/tonne taking into account prevailing spot values of PX and PTA.
($1 = €0.69)
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