08 March 2013 09:27 [Source: ICB]
European orthoxylene (OX) sentiment is starting to improve ahead of March contract settlement discussions, market sources said.
While the European market has struggled to find any clear direction in 2013, a seasonal upturn in demand - and 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 for the March contract. February OX was settled at €1,133/tonne ($1,491/tonne), an increase of €40/tonne from the previous month.
UPTURN YET TO SHOW
However, there has so far been no prominent upturn in demand from construction, 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 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 there 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. Tight 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 said, 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.
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