14 March 2013 13:16 [Source: ICIS news]
LONDON (ICIS)--The March European paraxylene (PX) contract has been confirmed at €1,250/tonne ($1,623/tonne), down €10/tonne from the previous month, sources said on Thursday, as the initial settlement received further support from players.
While sources had initially predicted a small increase for Europe in light of an initial Asian settlement at $1,670/tonne (€1,286/tonne) CFR (cost and freight) Asia, a sharp drop in spot values in the region combined with general oil and energy volatility delayed European contract negotiations.
“It was 100% Asia,” said one producer when discussing the decrease for the European March contract. “Initially it looked like we would see an increase but the market there just kept getting lower.”
The plummet in Asian spot numbers continued this week, with PX values dropping as low as $1,535-1,540/tonne FOB (free on board) Korea on bearish conditions in the downstream polyester market and a weak near-term outlook on purified terephthalic acid (PTA) due to producers cutting back output.
China's Yisheng Petrochemical has shut its two PTA units located in Dalian on 6 March, with no definite restart date scheduled, sources said earlier this week.
However, European players argued that the €10/tonne decrease was primarily driven by domestic market conditions as opposed to the recent losses seen in Asia.
The twin pressures of slow derivative offtake and firming raw material costs have made the downstream polyethylene terephthalate (PET) extremely challenging so far in 2013, and many argue that the consistent upward pressure from PX has eroded demand levels in a still-recovering market.
“We needed a number that was independent from Asia and reflected the European market,” one buyer involved in the settlement said. “It is moving in the right direction now.”
“Downstream sentiment is weak in Europe,” one seller conceded. “So a small decrease makes sense.”
The European contract was agreed on a free delivered (FD) northwest Europe (NWE) basis.
($1 = €0.77)
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