SE Asia PA demand bearish; output cuts may support market

SINGAPORE (ICIS)–Southeast Asia’s phthalic anhydride (PA) prices retreated after a recent upswing, as buying failed to pick up as well as earlier expected, but the market may be supported by tightening supply amid output cuts.

Laem Chabang port in Thailand. (By Rolf Richardson/Robert Harding/Shutterstock)

On 19 July, PA prices settled in the $900-920/tonne CFR (cost & freight) southeast Asia range. This also brought to close a month-long uptrend since 21 June, ICIS data showed.

The about-turn came as some sellers moderated expectations last week in a bid to close sales and keep cargoes moving, as their earlier, albeit higher, asking prices failed to draw positive response from buyers.

Moving forward, offers could hold steady, as “spot supplies are getting tight, and my selling pressures have receded”, a seller said.

Several plants in the region, involving more than 250,000 tonnes/year of total production capacity, have started to cut operating rates, to about 60-70% of capacity, so as to align production better with demand conditions in the market.

The cuts are in place for July, and may run longer into August, market sources said.

As long as production stays crimped, keeping spot availabilities correspondingly low, sellers expect this to provide some support to PA prices, or “minimally a floor”, as a producer put it.

What is less certain is how demand may fare in the near term. But spirits are still reasonably high among sellers, and one of them noted that “the worst may be over now”.

In May and June, trepidations about potential fallout from the US-China trade war, coupled with uncertainties generated by national elections in Indonesia and Thailand, kept demand in Asia on an extremely low ebb, causing prices to nosedive by 15% during that period.

But now that US-China trade talks are restarting, and the regional political landscape is stable with new governments elected and installed, “business should be back to usual soon”, a seller said

That said, such optimism remains at risk of being derailed by lingering headwinds in the global economy, such as US-China trade tensions, and lacklustre manufacturing index across Asia.

Against such a grim economic backdrop, regional end-users may continue to stay cautious and not overbuild stocks. If they keep to buying spot PA cargoes only in small lots and at longer intervals, this will do little to improve PA uptake nor lift prices, market participants said.

Focus article by Ai Teng Lim

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