Asian PX premiums stagnate as buyers shun existing formula

20 April 2012 05:44  [Source: ICIS news]

By Bohan Loh

SINGAPORE (ICIS)--Asian paraxylene (PX) premiums are stagnating as buyers have been shunning the formula on fears of difficulties in contract settlement, sources said on Friday.

Players in the spot PX markets have been shunning the formula which is based on 50% Asian Contract Price (ACP) and 50% CFR (cost and freight) quotes for buy-sell transactions.

Premiums for spot PX cargoes on a 50% ACP: 50% CFR quotes basis have stagnated at $15-17/tonne (€11-13/tonne) since 12 March with players showing little interest or discussions towards buying or selling against the formula according to data from ICIS.

There were fears that players will be unable to settle contracts if there were a repeat scenario of the January PX ACP when not all ACP-linked buyers and sellers were able to reach a concluded price, they added.

ACP-linked sellers such as JX Nippon Oil & Energy, Idemitsu Kosan and S-Oil fell back onto spot CFR quotes to settle contracts while ExxonMobil settled its January contract price with its customers at $1,445/tonne CFR Asia.

This had resulted contracts being settled in a wide and disparate range and had left other buyers and sellers confused over which price was the benchmark for the month.

The ICIS daily January average of CFR Taiwan and/or China Main Port (CMP) quote stood at $1,586.42/tonne, a $141.42/tonne premium to ExxonMobil’s contract price for the same period.

Players were worried that the ACP might be settled higher than expected which will make negotiations for premiums more contentious.

The April PX ACP was settled at $1,585/tonne CFR Asia between most ACP-linked buyers and sellers.

However, the settlement was higher than what most people expected as downstream purified terephthalic acid (PTA) players continued to grapple with squeezed margins.

Traders were expecting a settlement of $1,550-1,570/tonne CFR Asia for the April PX ACP.

“When the settlement is so much higher than what the market expected it to be, its really hard for us to have any meaningful negotiations over what premiums for cargoes should be,” said a northeast Asia-based trader.

Transactions on a 50% ACP: 50% CFR quote basis for spot shipments is usually readily accepted by most market players as a large portion of PX is bought and sold against the same formula. As such, players find familiarity and see transacting against this formula as a method to reduce volatility for feedstock costs as well as sales.

($1 = €0.76)

By: Bohan Loh
+65 6780 4359

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