06 March 2013 12:14 [Source: ICIS news]
By Truong Mellor
LONDON (ICIS)--Ongoing spot market volatility in Asia, combined with no clear March contract price settlement, is hampering European paraxylene (PX) contract discussions, sources said on Wednesday.
“We saw Asian PX spot numbers drop sharply starting last week, and then a subsequent recovery,” said one European producer. “It has made it difficult to get the ball rolling on contract talks here.”
Despite different production economics and different downstream market dynamics, the European market carefully tracks price developments in Asia, where PX is far more active and liquid, as a source of direction for the domestic market.
PX prices in Asia fell by $55/tonne (€42/tonne) to $1,585-1,590/tonne FOB (free on board) Korea on 1 March, the slump largely due to weaker downstream purified terephthalic acid (PTA) prices and uncertainty in the market in the absence of a major settlement in the PX Asia Contract Price (ACP).
While an initial ACP settlement was heard at $1,670/tonne CFR (cost and freight) Asia, other buyers were unwilling to follow this. There had also been talk of another settlement $30/tonne lower but this was unconfirmed.
The growing downtrend in Asia has meant that many European PX players have been waiting to see where the market eventually stabilises before engaging in any contract negotiations.
“With the numbers in Asia dropping, it would make sense for European buyers to sit on their hands and wait,” said one source last week.
The downward momentum in Asia continued this week, with FOB Korea bids moving as low as $1,515/tonne on Monday March 4 as underperformance in China’s growth indicators, declines in downstream pricing and an uncertain global market outlook weighed down further on the market.
However, this trend was suddenly reversed as the week progressed, with sources noting that PX prices firmed on increased buying interest, while availability remains balanced-to-short in the near term because of scheduled turnarounds in April.
By the close of business on Wednesday 6 March, Asian PX prices were at $1,580-1,590/tonne FOB Korea, having recovered much of the lost ground from earlier in the week.
“The market rebounded after the big emotional drop last Friday and on Monday,” said one European trader. “It seems to be getting a bit more stable now.”
The European producer added: “Perhaps now, some proper contract discussions can begin.”
($1 = €0.77)
Additional reporting by Yuo Go
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