FocusAsia PX hits 31-month low on demand lull

09 October 2008 10:39  [Source: ICIS news]

By Salmon Aidan Lee

SINGAPORE (ICIS news)--Asia spot paraxylene (PX) crashed to a 31-month low this week, breaking into three-digit territory for the first time since March 2006, and look set to drop further on weaker upstream values and downstream demand, buyers and sellers said on Thursday.

PX deals were concluded as low as $970-980/tonne CFR (cost and freight) Taiwan, representing a fall of $65-105/tonne from the previous week.

Compared with the year's peak of $1,705/tonne, the drop was as sharp as $725/tonne or almost a 45% loss in values.

"Crude oil falling, naphtha falling, aromatics all falling, so naturally PX will have to fall," said a trader based in Singapore, blaming the PX price debacle on the decline in energy values.

But market participants also cited the weak fundamentals in the downstream market as the main reason for the price fall.

"Look at it this way, we have so many PX units shut or cutting back on their operating rates, yet prices are falling, it’s obvious demand is simply not there," said a Chinese trader based in Macau.

This week PX producers which cut operating rates or idled some of their units included Samsung Total Petrochemicals, SK Energy, Japan Energy, Idemitsu Kosan, Nippon Oil, CPC Corp, Formosa Chemical & Fiber Corp and Trans Pacific Petrochemical Indotama (TPPI).

"We seem to have more downstream lines cutting down and the demand had been bad for some time since July, when prices of terephthalic acid (PTA) and PX fell back," said another Chinese trader based in Shanghai.

Derivative purified PTA units have been idled throughout the year due to falling margins.

As many as 24 PTA lines in Asia were either down or had their operating rates cut to about 70-80% of the nameplate capacity.

"We’ve no choice, even as our PX suppliers asked us not to shut, we have to do so as we’re making losses again and inventories are piling up," said an official from Sam Nam Petrochemical, a PTA maker in South Korea.

Other market participants said the sudden stoppage of Hualian Sunshine Petrochemical also had a huge impact on the PX demand, since the Chinese company was one of the largest consumers of spot PX.

"We’ve this weird situation now that because so many PTA plants are shut, there is a temporary PX glut," said the Singapore trader. "If all PX and PTA plants in Asia operate at full capacity, there would actually be a shortage of PX."

Added the procurement manager of a major PTA producer in Taiwan: "This teaches us a very important lesson.

"When we’ve an overcapacity in PTA, we should not jump to the conclusion that PX would be so short the downstream would buy PX at any price."

"Now, in the words of one of my main PX suppliers, the whole chain is terribly sick because of these flawed assumptions, and nobody can recover… I agree totally," said the procurement manager.

For more on PX visit ICIS chemical intelligence

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ICIS Copyright © Reed Business Information 2009

Author: Salmon Aidan Lee
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