28 January 2010 05:12 [Source: ICIS news]
By Bohan Loh
SINGAPORE (ICIS news)--A swift conclusion to the February paraxylene (PX) contract in Asia seems unlikely, as negotiations will be tough amid a downward spiral in spot values, market sources said on Thursday.
PX spot prices shed a hefty $50-60/tonne (€34-43/tonne) in just three days to $1,060-1,070/tonne CFR (cost and freight) ?xml:namespace>
Major producers – Nippon Oil, ExxonMobil and Idemitsu Kosan – had nominated an Asian contract price (ACP) for February PX cargoes in the range of $1,180-1,190/tonne CFR (cost and freight) Asia late last week, when spot values were still hovering around $1,120/tonne CFR Taiwan and/or CMP.
“The ACP is usually lower than the spot prices. February negotiations are going to be tough,” said a source from Formosa Chemical and Fibres Corp.
The February ACP nominations were $90-100/tonne higher compared to contract settlements in January. The February ACP is expected to be settled on 29 January.
“I was targeting for a roll-over or a slight increase from the settled January ACP of $1,090/tonne CFR Asia at the beginning of this week but this looks very unlikely now,” said a source at Mitsubishi Chemical, one of the key ACP negotiators in the region.
“The producers are very likely to reject anything below $1,060/tonne CFR Asia,” he added.
The ACP is usually settled within the last working week of each month and is widely considered as a benchmark price, on which almost all term supply contract formulas are based.
Regional PX markets started off the year on a strong footing, with spot prices hitting $1,160/tonne in the first week of January, but demand from downstream purified terephthalic acid (PTA) market dwindled as most of them have ample PX inventory.
Although a lower contract price settlement would directly translate into cheaper feedstock costs for buyers in the downstream purified terephthalic acid (PTA) market, industry sources said that PTA makers do not want a very low PX price.
“When you have too low a settlement, it becomes inevitable that spot PTA prices get dragged down as well,” said a source from Chinese PTA maker, East Hope Pengwei.
Spot PTA values have retreated by around $25/tonne over the past one week and were assessed at $935-948/tonne CFR CMP, tracking the fall in PX costs.
“The current PX/PTA spread is still very healthy. The PTA makers can definitely afford a higher settlement to cushion any further falls in spot PTA values,” said a source from
The prevailing PTA spot value would be able to support a PX price of around $1,180/tonne CFR Taiwan and/or CMP, market sources said.
($1 = €0.71)
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections