Europe Dec PX to balance weak demand with bullish upstream values

27 November 2012 11:19  [Source: ICIS news]

Europe Dec PX to balance weak demand with bullish upstream valuesLONDON (ICIS)--Players in the European paraxylene (PX) market are anticipating tough negotiations for the December contract price following high nominations seen in Asia, sources said on Tuesday.

“It will be a difficult discussion in Asia as well,” said one European buyer. “Energy numbers are bullish but PTA [purified terephthalic acid] is looking weaker.”

Nominations from the key producers in Asia for the December settlement were heard earlier this week, ranging from $1,590-1,620/tonne (€1,224-1,247/tonne) CFR (cost and freight) Asia, while current spot levels are around the $1,570/tonne CFR Asia level.

Prices across the region are firming on the back of higher upstream crude futures and stronger downstream PTA prices. Nevertheless, massive expansions on PTA in China that are starting to come on line already have left many players bearish on pricing for 2013 both in Asia and Europe.

Some 11.8m tonnes in additional PTA capacity are expected to come on stream this year, boosting China’s total annual PTA capacity by 37% to 31.9m tonnes by end-2012, according to ICIS.

While the October PX Asian Contract Price (ACP) was settled at $1,490/tonne CFR Asia, there was no agreement reached between any of the key settling parties for November.

Europe, meanwhile, settled the November contract at €1,210/tonne on a free delivered (FD) northwest Europe (NWE) basis, up €20/tonne from the previous month. The slight increase had been expected by many, as it kept European numbers slightly above Asia.

European spot prices have since edged down over the course of the month, with a wide gap emerging between bids and offers as weak derivative demand keeps buyers on the sidelines. Falling mixed xylenes (MX) numbers this month on improved availability have also led to some price erosion in Europe.

“December is looking very slow,” said another PX consumer. “We have several customers that are shutting down.”

However, balanced supply levels mean that sellers are largely unwilling to drop offers significantly below the contract price this month. Additionally, with European spot material notionally valued around the $1,450/tonne FOB Rotterdam mark, this meant the arbitrage window from Europe to Asia was potentially open, which could keep domestic prices from slipping further.

Looking ahead into 2013, the global polyester market will face challenges of overcapacity and feedstock supply constraints. Downstream players will need to secure a reliable source of PX in order to stay competitive, and the push and pull of tight feedstock supply and depressed downstream margins may lead to some market rationalisation in the future.

($1 = €0.77)

By: Truong Mellor
+44 208 652 3214

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