PX – PTA market struggle intensifies

Aromatics, Business, China, Company Strategy, Fibre Intermediates, Markets

By Malini Hariharan

Asian paraxylene (PX) and purified terephthalic acid (PTA) markets have started 2012 on a contentious note that is likely to be repeated for the rest of the year.

The January Asian Contract Price (ACP) for PX is in disarray with major producers and buyers unable to agree on a number. Only ExxonMobil settled at $1,445/tonne cfr Asia with most of its buyers but other players have rejected this figure.

JX Nippon Oil and Idemitsu Kosan have declared a price disagreement for January and are expected to privately negotiate a settlement for contracted cargoes.

Initial nominations for January ranged from $1,510 to $1,550, significantly higher than the December ACP of $1,390/tonne cfr Asia. The hikes were attributed to tight supplies in January and February ahead of new PTA plant start-ups in China. But faced with negative margins for most of Q4 2011 buyers were in no mood to accept the price hikes.

The problems with the January contract follows the controversy in October 2011 when differing price expectations had held up negotiations. The difference this time is that at least one producer managed to arrive at a settlement but the rest of the market did not accept this.

PX supplies are projected to be tight in 2012 and so a repeat of the January disagreement looks very likely.

Nearly 11.5m tonnes/year of PTA capacity is due to be commissioned in Asia this year while only two new PX plants with a total capacity of 1.4m tonnes/year are scheduled to start up.

There is already news of one delay. China’s Dragon Aromatics’ 800,000 tonnes/year PX plant at Xiamen has been delayed by 5 months to Q3 2012 as a pipeline linking the plant to the company’s PTA unit has not been completed, reports ICIS news.

Bohan Loh, the ICIS pricing editor for PX in Asia, estimates that new entrants to the PTA market have so far managed to cover only 10% of their PX requirement on contract. Contract premiums for 2012 have risen sharply with some players paying as much as $15/tonne to secure sufficient volumes.

Spot PX markets are likely to see considerable volatility this year. Producers will be looking for every opportunity to push for higher numbers but if price hikes cannot be passed along the chain, negative margins would lead to operating rate cuts among PTA makers.

But negative margins may not deter companies starting up new PTA plants. These players are likely to be active in the spot market, willing to pay high prices to to secure volumes required for a smooth start up.

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