Europe Sept PA rolls over, some producers unhappy with margins

10 September 2010 23:59  [Source: ICIS news]

LONDON (ICIS)--European September phthalic anhydride (PA) contracts settled at a rollover for the fifth straight month, following a rollover from August to September in the feedstock orthoxylene (OX) contract price, sources said on Friday.

Contract negotiations concluded swiftly, with little argument between buyers and sellers following confirmation of the OX contract price late last week. Liquid PA contracts settled at €1,070-1,085/tonne ($1,354-1,373/tonne) FD (free delivered) NWE (northwest Europe), and flake at €1,005-1,060/tonne FD NWE, sources said.

OX vs PA“September was done at a rollover. It happened very quickly, there were no real discussions,” a producer said.

Some producers continued to say that margins between OX and PA were too low, but that they had been unable to increase prices in September due to balanced supply and demand.

One producer said that it would not be possible to improve margins until there was consolidation in the market, and predicted that low profitability could force some non-integrated PA producers out of the market before the end of the year.

“Producers are unsatisfied by the price compared to OX... it’s only possible to restore the [PA] price if there’s consolidation in the market,” the producer said. “If there’s no reduction of nameplate capacity in Europe, the situation in Europe for PA [prices] will remain unsatisfactory. If you’re only a PA producer you lose money. How long can they survive? That’s the question mark in the PA market.”

The September contract price margin between PA and OX is broadly at the same level as it was in September 2009 for liquid and has improved for flake. Although margins narrowed during December 2009 and March 2010, they saw some recovery from June to August, when the OX contract price decreased, but PA contract prices remained stable.

In September 2009 the spread between OX and PA contracts was €140-200/tonne for flake and €230-340/tonne for liquid. As of September 2010, the spread between OX and PA contract prices is €215-270/tonne for flake and €280-295/tonne for liquid.

($1 =  €0.79)

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By: Mark Victory
+44 208 652 3214

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