US phthalic anhydride price hikes go on, and on

13 June 2008 23:18  [Source: ICIS news]

WASHINGTON (ICIS news)--North American phthalic anhydride (PA) consumers appeared resigned to paying higher prices, as the stream of increases was not expected to end any time soon, buyers and sellers said the week of 13 June.

The increments have been mostly driven by strengthening feedstock orthoxylene (OX) values, which, in turn have climbed on the back of skyrocketing crude oil prices.

The previous month’s OX contract settlement is typically the main component of each month’s PA formula pricing.

PA prices have shown increases every month since December, along with equal increments in OX values, with the exception of March, when PA prices decreased by 2.50 cents/lb due to the decline in February OX values.

June PA prices were once again on an upward trend, edging up by 2 cents/lb ($44/tonne, €29/tonne) in line with a 2 cents/lb increment in May OX contract values.

May OX contracts settled at a 2.00 cents/lb increment to 56.50 cents/lb, buoyed by soaring crude oil values.

June PA prices for molten material were assessed at 69.50-76.50 cents/lb FOB (free on board) USG (US Gulf), while flake PA was at 70.50-76.50 cents/lb DEL (delivered), according to global chemical market intelligence service ICIS pricing.

PA consumers were bracing for another increase of 3 cents/lb in July, largely driven by an equal increase in June OX contract settlements. June OX contracts climbed 3 cents/lb to settle at 59.50 cents/lb FOB USG, again propelled by steep crude oil numbers.

PA market participants said there was also a 1-cent/lb PA manufacturing fee increase pending from April. Producers had nominated a 3 cents/lb manufacturing fee increase in April, but only implemented a 2 cents/lb increase and postponed the remaining 1-cent/lb hike to July.

Given the steady rise in OX values over the last several months, and the upcoming 3 cents/lb increase for July PA, both buyers and sellers expressed doubts that the additional penny would be accepted, but this remained to be seen. Negotiations between PA buyers and sellers were said to be ongoing.

Market observers said it was difficult to predict how high prices may go in the next few months, as crude oil values continued to register sky-high levels and remained volatile.

One participant said the third-quarter outlook for feedstock OX was mixed, as some participants anticipated flat pricing after June, while others foresaw a continuation of the increases seen recently, with OX prices possibly moving into the mid-60s cents/lb.

PA buyers lamented the higher raw material costs and the challenges of passing the increases through to downstream markets due to lacklustre conditions and competitive activity.

Demand from the key unsaturated polyester resin (UPR) segment remained soft and manufacturers were resisting the higher raw material costs, sources said.

UPR producers were targeting increases for June, hoping to offset some of the raw material price increments. However, the fate of these increases was still uncertain.

UPR suppliers had recently attempted the implementation of another hike, but sources said only part of the nomination had been accepted.

Koppers, Stepan and BASF are among the major suppliers of phthalic anhydride in North America.

Ashland, Interplastic, Eastman, AOC Resins and Reichhold are among the buyers.

($1 = €0.65)

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Author: Gabriela Wheeler
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