FocusAsia PTA may extend gains on likely spike in feedstock costs

15 August 2011 10:17  [Source: ICIS news]

Typhoon Muifa brought on rains and strong waves that breached the protective dike of Fujia DahuaBy  Judith Wang and Bohan Loh

SINGAPORE (ICIS)--Asian spot prices of purified terephthalic acid (PTA) may continue to increase in the coming weeks, given a strong likelihood that costs of feedstock paraxylene (PX) will spike on tight supply once Fujia Dahua shuts its aromatics plant in Dalian, China, market sources said on Monday.

Offers for Taiwan PTA cargoes were quoted at $1,260-1,265/tonne (€882-886/tonne) CFR (cost and freight) CMP (China Main Port) on Monday morning, up $10-15/tonne from Friday's levels, traders said, adding that one shipment was concluded at $1,260/tonne CFR CMP.

Over the weekend, the local government of Dalian in northeastern China has ordered that the 700,000 tonne/year PX plant be immediately shut following protests over the weekend that the company’s aromatics facility be relocated on pollution concerns.

“PX prices may rise above to $1,600/tonne CFR CMP on potential tight supply, so PTA prices will be supported by higher feedstock cost,” said a PTA trader.

Spot PX prices were last assessed at between $1,519-$1,529/tonne CFR CMP on 12 August, according to ICIS.

Early last week, rains and strong waves brought on by Typhoon Muifa breached the protective dike of Fujia Dahua’s aromatics complex, raising concerns of toxic chemical spill among residents in the surrounding areas.

China’s major downstream PTA producers, including Yisheng Petrochemical, Yuandong Petrochemical, Xianglu Petrochemical partly rely on feedstock supply from Fujia Dahua’s PX plant in Dalian, market sources said.

No force majeure was issued so far, said a source at Yuandong Petrochemical.

Fujia Dahua, meanwhile, is still running normal operations at the PX facility as of early Monday afternoon.

“We are still operating the plant normally and there is no immediate impact to August shipments,” said an official from the company.

“We are still negotiating with the local government on how we are going to handle this issue. Discussions are in the early stages,” the official added.

Taking aside the issue of a possible increase in feedstock costs, however, PTA prices do not find much support from downstream demand, market sources said.

Recent soft sales-to-output ratio from downstream polyester plants will likely hinder PTA price gains.

“If PTA prices could not rise in line with rising PX prices, we will consider cutting the operating rates due to squeezed margin,” said a major PTA producer.

($1 = €0.70)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Judith Wang
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