Europe January PA rolls over on OX price settlement

14 January 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European phthalic anhydride (PA) contract prices for January have settled at a rollover from December following a similar development in the contract price for the feedstock orthoxylene (OX), buyers and sellers said on Friday.

ICIS assessed freely negotiated liquid PA contract prices at €1,155-1,170/tonne ($1,540-1,560/tonne) FD (free delivered) NWE (northwest Europe) and those for flake material at €1,090-1,145/tonne FD NWE, both unchanged from December's prices.

Producers continued to complain of weak margins, which they said were unsustainably low.

Poor demand for PA in 2010, coupled with continuous increases in production costs, had eroded margins by around €200/tonne over the course of last year, producers added.

Low margins resulted from overcapacity in the market, with some players estimating a 100,000 tonne/year gap between supply levels and demand, because of falls in consumption levels since the beginning of the global economic recession.

Although consumption was rising as the global economy recovered, some players estimated that it would take two to three years before buying interest returned to the pre-recession levels seen in 2007.

As a result of weak consumption in November and December, combined OX cost increases of €85/tonne across the two months had not been passed on in the PA spot market.

Restocking demand following the end of the Christmas holiday closures – along with fewer imports from Asia due to high OX prices in the region and a strong US dollar that priced PA out of the European market – meant that producers were able to recover some of the margins lost in the PA flake spot market during the fourth quarter of 2009.

Flake spot prices this week increased by €50/tonne to €1,050-1,150/tonne FD NWE.

Liquid spot prices, however, were stable at €1,150-1,100/tonne FD NWE. This was because of an absence of liquid spot volumes, as most requirements were being covered on a contractual basis.

($1 = €0.75)

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By: Mark Victory
+44 208 652 3214



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