Europe PA December contract prices soften on costs

14 December 2012 23:59  [Source: ICIS news]

LONDON (ICIS)-European phthalic anhydride (PA) contract prices have softened by €27/tonne ($36/tonne) in December, in line with the reduction in upstream orthoxylene costs, market players said on Friday.

This is attributed to the majority of PA contracts being formula-based.

To reflect the reduction, the PA contract ranges have been changed by ICIS to €1,388-1,418/tonne FD (free delivered) NWE (northwest Europe) for liquid and €1,338-1,408/tonne FD NWE for flake, according to ICIS.

Numbers below the range were also heard, but they were seen to be for net rather than gross values.

PA demand remains subdued, because of stricter inventory management at year-end due to working capital constraints and downstream plant closures over the December/New Year holiday period.

The PA liquid market is balanced to long, but there is some talk that production cutbacks and recent turnarounds for some players have helped to offset demand softening, keeping the market relatively balanced.

PA flake supply, however, remains plentiful because of a combination of domestic product and imported volumes ex-Russia and ex-Belarus, coinciding with a lower demand period.

Spot prices were under pressure in the first half of December and continue to trade below the contract level. This is because spot prices have been most affected by subdued demand and strong competition as some sellers needed to shift volumes before year-end.

However, PA spot prices have now stabilised because buyers are still trying to push prices lower. There is some seller resistance as suppliers said they prefer to sit on stocks, based on the expectation that the OX price could move up in January because of increased export opportunities to Asia, and that PA prices could move up as a result. PA liquid spot prices are largely talked in the €1,300s/tonne FD NWE and PA flake prices in the low-to-mid €1,200s/tonne FD NWE.

Some sellers contest such low PA flake prices, stating that it does not make sense to produce and sell at this level taking into account the feedstock, manufacturing, freight and packaging costs.

Prices up to €1,280/tonne FD were heard for PA flake in northwest Europe from a few sellers, but there was insufficient market comfirmation to substantiate this. Numbers below €1,200/tonne FD for PA flake were talked in eastern Europe, but this was not seen to represent the general level in northwest Europe.

In manufacturing news, Proviron's PA operations at Ostend in Belgium are now running normally again, following a completed maintenance turmaround, which took place in November.

($1 = €.76)

By: Heidi Finch
+44 20 8652 3214

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