27 September 2010 06:34 [Source: ICIS news]
By Bohan Loh
Backwardation is a market condition wherein values of prompt cargoes are higher than prices of parcels for future delivery. Its reverse condition is called a contango.
PX was in a $5-10/tonne (€3.7-7.4/tonne) backwardation last week, while other aromatics such as benzene and toluene had remained at a $5/tonne contango, market sources said.
A PX parcel for second-half October delivery was sealed at $1,045/tonne CFR (cost and freight) Taiwan and/or China Main Port (CMP), while cargoes for delivery at any time in November changed hands at $1,035/tonne CFR Taiwan and/or CMP late last week, market sources said.
“Reduction in [plant] operating rates, coupled with JX Nippon Oil and Energy’s decision to discontinue its monthly 20,000-tonne sale tender should be the key driver factors for the recent surge in spot PX prices, as well as the tight supply conditions for H2 October,” said a northeast Asian-based trader.
Benchmark CFR Taiwan and/or China Main Port (CMP) prices had spiked more than 14% since mid-August, after leading PX maker, JX Nippon Oil and Energy announced it would discontinue any further spot sale through the fourth quarter of 2010.
Meanwhile, key producers in
“The reduction in operating rates coupled with some end-users’ intention to raise inventory levels ahead of the negotiation period for 2011 contracts should keep supply balanced-to-snug for the rest of the year,” said another northeast Asian based trader.
Some downstream purified terephthalic acid (PTA) makers were said to be making additional purchases for delivery in the fourth quarter to increase inventory levels, to gain leverage for 2011 contract negotiations from October through December.
Despite the prevailing firm sentiment, market players said they expected a PX oversupply condition by mid next year, with around 1.9m tonnes of new capacities coming on stream just in the first quarter of 2011.
For the whole of next year, meanwhile, about 2.1m tonnes of new PTA capacities would be added.
“After considering the fresh PTA capacities, there would still be a surplus of 500,000 tonnes of PX in the market,” said a Korea-based trader.
($1 = €0.74)
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