Europe OX buyers seek contact price decrease for December

29 November 2012 12:08  [Source: ICIS news]

LONDON (ICIS)--Buyers in the European orthoxylene (OX) market are galvanised for a decrease on the December monthly contract, sources said on Thursday, as demand from key end-use markets softens ahead of the year end.

“Demand is weaker, so there is no real reason for prices not to come down,” said one buyer. “We have no problems securing what we need, and nobody is looking to build stock at this time of year.”

While the market has struggled in 2012 with record high pricing stemming from supply limitations, with spot levels moving over $1,700/tonne (€1,309/tonne) at one point, softer demand and lower mixed xylenes (MX) values have pulled numbers back down in the fourth quarter.

“Both paraxylene (PX) and OX really started to come down with the lower MX numbers this month,” said one trader, who expected OX spot prices to move below $1,300/tonne in December.

Nevertheless, one seller felt that supply still remains balanced, which will help mitigate any downward movement on pricing next month.

“It’s not as bad as it was earlier in the year,” the seller said, “but there are still some pockets of tightness in the market.”

There is also some potential upward pressure coming from Asia, where spot levels are at $1,470-1,510/tonne, depending on market, with supply concerns and steady-to-firm upstream and energy costs have supported the numbers despite weak offtake from derivative sectors.

However, despite the arbitrage opportunities, there was no real incentive for European players to fix cargoes for export to the region, as the firm pricing was not supported by healthy demand and buyers were not looking to fill inventories.

Indeed, some downstream operators in Asia complained of squeezed margins and are contemplating a reduction in their plant operating rates in the first quarter of next year.

Players in the downstream European phthalic anhydride (PA) market, meanwhile, are hoping for some price relief in December, as they have struggled with margin erosion amid slower than usual demand from the coatings and construction sectors this year.

The November OX contract was confirmed at €1,120/tonne on a free delivered (FD) northwest Europe (NWE) basis, a reduction of €20/tonne from the previous month.

($1 = €0.77)

By: Truong Mellor
+44 208 652 3214

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