Europe OX March talks at stalemate over initial settlement figure

16 March 2010 11:44  [Source: ICIS news]

LONDON (ICIS news)--Negotiations for the European March orthoxylene (OX) contract are at a stalemate as several key sellers in the market remain reluctant to follow the initial €750/tonne ($1,027/tonne) settlement, sources said on Tuesday.

“We will not be following this number officially,” said one producer, adding that it was not confident in the settlement, a €30/tonne increase from the previous month.

Another major seller also said that it was not happy with the initial number, adding that it would be looking at alternative options.

“However, once a number is out there it is more difficult for those that have not settled yet,” the seller conceded.

Sellers’ main arguments against the initial settlement, which was done on a free delivered (FD) northwest Europe (NWE) basis, were that it was too low given current tightness in the European market and current OX values in other regions – in particular Asia, where it was close to breaching the $1,200/tonne level in the spot market.

“The initial March number is out of step with the global market,” said one of the sellers. “This is why we are reluctant to follow.”

A major European buyer said that it had already settled March at €750/tonne and added that, while sympathetic to the issue of low operating margins in Europe, the current buoyancy seen for OX in the Asian spot market was not an accurate benchmark for European contract discussions as it only represented a supply-driven peak rather than sustainable price levels.

The buyer also said that sellers had not factored in these arguments into monthly discussions when overseas markets were seasonally low.

“These monthly negotiations are always an arm-wrestle,” said the buyer. “What players need to be focused on are the deeper structural arguments relating to supply/demand issues in Europe and how to maintain margins.”

($1 = €0.73)

For more on OX visit ICIS chemical intelligence
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By: Truong Mellor
+44 208 652 3214

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