FocusAsia PTA sellers face difficult August

18 July 2007 04:30  [Source: ICIS news]

By Salmon Aidan Lee

SINGAPORE (ICIS news)--Purified terephthalic acid (PTA) sellers in Asia face a difficult time in August despite this month’s strong sales as supply increases and stocks at buyers rise.

"Since our customers took more than they were expected to in July, and the sale basically went much more smoothly than expected, we’re not sure come August, whether they would still demonstrate such willingness to buy," a trader with C & J Trading of Shanghai said on Wednesday.

The contract price for July PTA had been largely settled at a tentative $920-940/tonne CFR (cost and freight) China, amid a strong offtake among end-users in China, buyers and sellers said.

"We actually did not want to buy so much PTA in July, but our boss was concerned that prices could keep rising so we decided to buy first and see how it goes later," an official with Xiang Sheng Chemical Fiber, a polyester producer, said.

This view was echoed by at least twelve other polyester producers based in the eastern Chinese provinces of Zhejiang and Jiangsu.

One of them was Jiangsu Sheng Hong, who is currently undergoing a brief shutdown of its existing polycondensation line in order to integrate with a new unit.

"We did not need that much PTA; we now have more than enough inventories till the end of this month, so we won’t be aggressive for August," said one of its procurement managers.

The resumption of full operating rates at almost all Asian PTA plants and the recent entry of Chinese producer Liaoyang Petrochemical would result in oversupply and weigh down the market, market observers said.

"Upstream prices were also sluggish, PX (paraxylene) prices were just so-so, and even though crude futures rose, they don’t seem to have much of an effect on PTA prices," a trader with Ningbo Cixi Import and Export said.

He was referring to PX spot prices which had moved sideways at $1,160-1,190/tonne CFR Taiwan for the past two weeks and crude futures edging towards $80/bbl.

"We’ve not even talked about the July spot volumes still held by the traders," said a trader with Winsway Trading of Macau.

"If we count those, and take into consideration all the [above] factors, it would be incredible if PTA prices could keep rising for [the rest of the month]," he said.

The words of an official with Siam Mitsui, a 1.4 million tonne/year PTA producer in Thailand, summed it all up.

"We’re aware of all these and we’re monitoring the situation and would cut our operating rates again if the market shows signs of deteriorating [in the second half of July], if [only] to maintain our margins for August," he said.

While worried about August, PTA suppliers were more than happy about July.

"The picture for July had become much better than before," said a trader with C & J.

"Demand had been unexpectedly strong, and we’ve basically sold off every tonne of contract volume of [PTA] for this month," said the trader, who is an agent for Formosa Chemical & Fiber Corp’s PTA.

A straw poll among PTA suppliers showed that most had settled July business at a tentative $930-940/tonne, with some settling about $10/tonne lower due to rebates for earlier months’ prices. 

"Settling below $930/tonne should not be a problem as demand had been so strong and we’ve moved all volumes even before any price fall could occur," an official with BP, the world’s largest PTA supplier, said.

Currently, spot PTA stood at $940/tonne, with the potential of edging higher as speculators talked up the market.

However, May and June settlements are yet to be fully settled.

The May price was estimated to be around $950-960 but some sellers were still yet to agree with customers over the final settlement.

The June price was anybody’s guess due to a lack of volumes that month, an official with Mitsui Chemical and an agent for Mitsubishi Chemical said.

But some end-users who offtook contract Taiwanese and southeast Asian PTA based on spot averages said their June price was around $930/tonne, a price hotly debated by some producers such as Samsung Petrochemical Co (SPC).

"June’s feedstock cost was so high, nobody would sell at such low prices; we sold ours at $980/tonne and above," said an SPC official.

Feedstock paraxylene contract price was at $1,245/tonne CFR Asia, so selling below $980/tonne would translate into massive losses for PTA makers.

ICIS Copyright © Reed Business Information 2009

Author: Salmon Aidan Lee
+65 6780 4359

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