Europe OX sentiment improving ahead of March contract discussions

26 February 2013 10:42  [Source: ICIS news]

LONDON (ICIS)--European orthoxylene (OX) sentiment is starting to improve ahead of March contract settlement discussions, which are expected to get underway this week, market sources said on Tuesday.

While the European market has struggled to find any clear direction so far in 2013, a seasonal upturn in demand – combined with limited production output – may push values up towards the end of the first quarter.

One major consumer said contract-related offtake was steady and reasonably healthy for this time of year. European supply is described by one trader as balanced, although spot activity remains thin.

“Availability may very well tighten over the coming weeks,” one seller said. “One producer is currently down, and there are some other turnarounds scheduled.”

As a result, several players are already predicting further increases on the monthly contract for March. February OX was settled at €1,133/tonne ($1,491/tonne), an increase of €40/tonne from the previous month.

However, there has so far been no prominent upturn in demand from the construction sector, which traditionally sees increased activity ahead of March as the weather improves.

Some downstream phthalic anhydride (PA) sources have noted that resin demand is steadily improving, as the wider economy shows signs of recovery. PA availability is starting to tighten, with firm Asian prices keeping exports into Europe from the region to a minimum.

Higher OX prices in Asia could also help push the European market up, as domestic players look to ship material to the region in order to capitalise on any arbitrage opportunities.

OX prices were up by as much as $30/tonne in Asia following the Lunar New Year holiday period, as players looked to replenish inventories. Restricted availability – as producers have focused on paraxylene (PX) production in recent weeks – also supported the uptrend.

However, one trader said that it did not see any major pull coming from Asia on European OX.

“There simply isn’t enough cargo here,” the trader explained, adding that it had expressed an interest in securing material this month, but availability was severely limited outside of contracted volumes.

Additionally, high freight rates between Europe and Asia owing to tight vessel availability is limiting any potential profit taking.

($1 = €0.76)

By: Truong Mellor
+44 208 652 3214

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