24 May 2013 09:21 [Source: ICB]
Decrease comes as a surprise to some players as production problems caused concern
The May European orthoxylene (OX) contract has been confirmed at €1,110/tonne ($1,442/tonne), down €18/tonne from the previous month, as the initial settlement received further support from players on 14 May.
The decrease came as a surprise to some market participants, who felt that various production problems in Europe - combined with an upcoming turnaround this month - was keeping availability balanced-to-tight.
One supplier said it had sold a spot parcel at $1,500/tonne FOB (free on board) Rotterdam earlier in May, and had the impression that supply was still a concern in Europe, after one producer declared force majeure and another manufacturer went into turnaround this month.
Players are lifting contracted volumes for May despite ongoing bearishness in the key downstream construction market.
"Demand is solid," said one supplier. "Everybody is lifting contract volumes."
However, some end-users continue to struggle with passing on firmer raw material costs, and downstream sources said there has been an uptick in purchasing in line with seasonal expectations.
But this was likely to remain limited, owing to the uncertain macroeconomic climate.
A buyer said: "OX availability has improved. If you look at feedstock costs, they went down. Also, if you look at [pricing in] the US, the gap between Europe and the US is quite a difference - and then there is the pressure on the downstream market."
The buyer explained that there was price pressure on the derivative plasticizers sectowr, and said the price move was in line with expectations.
"It's more or less what I was expecting. I expect availability to further improve in June. I don't expect the price pressure to go away on the downstream market. Demand is not as good as it could be, but for us it is as expected," the buyer added.
The US OX contract price for May looks set to rise by 2 cents/lb on the back of a stronger US mixed xylenes (MX) contract settlement for this month, pending further confirmation from the market.
Meanwhile, the May paraxylene (PX) contract price in Europe rolled over.
The OX settlement was agreed on a FD (free delivered) NWE (northwest Europe) basis. OX is largely used in the production of phthalic anhydride (PA) and is generally extracted by distillation from a mixed xylenes (MX) stream in a plant primarily designed for PX production.
Additional contribution from Truong Mellor
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