Intermediates: PA prices in the US and Europe get a boost from OX

20 February 2012 00:00  [Source: ICB]

Rising orthoxylene prices have lifted European February phthalic anhydride (PA) contracts by €100/tonne ($133/tonne) over January, the result of a massive increase in the price of feedstock orthoxylene (OX).

PVC pipes, Danndalf
 © Danndalf
Phthalates are used in PVC

February PA contracts in the US are likely to rise as well, given the 10% price hike seen in the January OX settlement. US PA contracts typically reflect the previous month's OX price.

ICIS assessed January OX contracts at 62 cents/lb ($1,367/tonne, €1,080/tonne) FOB (free on board) USG (US Gulf), a 6-cent/lb increase over December.

PA producers will be particularly eager to get an increase in February, having failed to win a 2-cent/lb manufacturing fee increase for the January contract.

Indeed, with OX prices dropping in December, producers found themselves cutting January PA prices by 3 cents/lb.

According to a major buyer, the manufacturing fee likely failed because 1 cent was rescinded. The remaining 1 cent may be implemented in March contracts.

January contracts for molten-grade PA were assessed at 72-79 cents/lb, down from 75-82 cents/lb in December, while flake-grade was assessed at 73-80 cents/lb, down from 76-83 in December.

PA contract prices in the US will remain under pressure in March.

During the first week of the month, ICIS assessed US February contracts for OX at 69 cents/lb FOB USG - a 7 cent/lb increase.

PA is a key intermediate in the production of phthalate plasticizers, which are widely used in flexible polyvinyl chloride (PVC).

Major US PA producers include BASF, Koppers, and Stepan. Major US OX producers include ExxonMobil Chemical and Flint Hills Resources.

Aromatics pricing is rising globally, and in Europe, the trend lifted February OX contracts by €100/tonne to €1,060/tonne FD (free delivered) NWE (Northwest Europe).

A 'SHOCKING' INCREASEThe increase is the largest recorded for OX in Europe since ICIS began reporting on it in 2006. The previous record increase was in August 2006, when prices rose by €90/tonne to settle around the €970/tonne mark. "That was a shock," one PA seller said of the OX price. "The last time it was that high was in 2008, and even then it wasn't at that level."

The February PA contract was settled with an equal increase at €1,355-1,385/tonne FD NWE for liquid, and at €1,290-1,360/tonne FD NWE for flake.

Demand for PA has been good, according to one producer, particularly for flake exports to Asia.

The producer said that European demand has improved slightly, compared to November and December offtake.

Some producers are not operating at full rates, he added.

A trader noted that the cold weather in Europe had hampered production output.

"There has also been big demand for flake export to Asia, the Middle East and the Mediterranean," he continued. "A few producers are sold out, [and] prices have rallied this week."

EU PA table EU PA table

Some producers had targeted increases of €120-150/tonne for February PA contracts in an attempt to recoup margins.

The trader added: "The contract for February with the €100/tonne OX increase has been fully accepted by consumers. Some even accepted higher increases. We expect another increase for March now."

Spot material during the week ended February 10 was priced at €1,280-1,300/tonne for liquid PA, and at €1,300-1,320/tonne FD NWE for flake.

PA producers in Europe include BASF, Lanxess and Arkema.

Includes reporting by Blanca Venegas in Houston and Helena Strathearn in London

By: Clay Boswell
+1 713 525 2653

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