UpdateChina PTA futures prices spike 4% on bullish sentiment

04 November 2010 07:07  [Source: ICIS news]

(adds supply conditions, market comments)

By Becky Zhang

SINGAPORE (ICIS)--China's purified terephthalic acid (PTA) futures prices surged 4.02% to yuan (CNY) 9,626/tonne ($1,441/tonne) Thursday morning on bullish sentiment, prompting a trading halt, market sources said.

Recent outages at regional plants, along with positive news on the US economy overnight, spurred buying activities that pushed PTA futures to breach the 4% cap set on daily swings in values in just the first two hours of trade at the Zhengzhou Commodity Exchange, they said.

In the spot market, domestic PTA prices in China jumped CNY150-200/tonne from Wednesday to CNY8,950-9,000/tonne ex-warehouse on strong buying from a number of Zhejiang-based polyester makers, market sources said.

Market players were surprised by the sudden and sharp increase in prices, notwithstanding the supply tightness in the PTA market.

“Tight supply, US’s good economic data, and healthy polyester sales are the strong stimulus to the speculators, who were taking the opportunity to drive up market prices,” said a polyester maker with operations in Zhejiang.

PTA supply was expected to remain tight in November due to low operating rates at plants, along with outages and maintenance shutdowns at a number of Chinese and Taiwanese PTA facilities.

Zhejiang Yuandong Petrochemical had to cut its contracted PTA volumes with customers by half as it was having mechanical problems at its 600,000 tonne/year PTA plant in Shaoxing.

Meanwhile, Zhejiang Yisheng and Jialong Petrochemical shut their 550,000 tonne/year No 2 unit and 600,000 tonne/year plants, respectively, early this week for maintenance. The plants’ turnaround would last a week.

In Taiwan, Tuntex has a scheduled three-week turnaround at its 440,000 tonne/year PTA unit on 1 November, while Formosa Chemical Fibre would keep its 700,000 tonne/year in Long-der off line for two weeks from the start of November.

Meanwhile, some Korean producers were keen to cut some of their contract volumes, and keep more material for spot sales in view of current high prices, market sources said.

“Our November contract volume has been cut by 25-30%,” said a trader dealing with Korean cargoes.

Speculators may be driving up PTA prices because of the strong spikes in cotton prices. Cotton futures on the Zhengzhou Commodity Exchange were up 11% week on week at yuan CNY29,715/tonne on Wednesday’s close.

Most PTA output goes into production of polyester fibre, which could be a good substitute for cotton.

($1 = CNY6.68)

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By: Becky Zhang
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