Europe PX May talks slow, sources fear confusion from April settlement

04 May 2017 14:44 Source:ICIS News

Polyester reels. Source Tim Graham, robertharding, REX, Shutterstock

LONDON (ICIS)--Contract talks for paraxylene (PX) in Europe for May are a little slow to start, with some sources concerned about where prices will settle following the wide split settlement in April, buyers and sellers said on Thursday.

“It does seem a little subdued,” one customer commented.

However, there was concern about starting the negotiations following the widest split settlement of €35/tonne apart in April.

The European contract price was agreed quite late in the month at €815-850/tonne FD (free delivered) NWE (northwest Europe).

While this was the fifth split settlement in the last year, all other agreements had spanned a range no wider than €5-15/tonne.

One PX source noted that “the problem is we have so few key negotiators,” adding that the different downstream sectors did little to add to unity on the buy-side.

With good supply and downward pressure from the Asian markets, some softening is anticipated for PX.

“It depends if we are starting from €850/tonne FD NWE or €815/tonne FD NWE,” said one source.

This is likely to add an additional complexity to the lengthy negotiations.

It is the length of negotiations, after all, that downstream European sources from the purified terephthalic acid (PTA) and polyethylene terephthalate (PET) markets are worried about, with some saying they found it difficult to conduct business due to the delay in the April PX settlement.

A PTA buyer previously said that the situation meant it could not drive its business on in April, especially as PX is typically settled at the start of a month.

The April PX contract was settled on 21 April while the previous contract, in contrast, was confirmed on 3 March.

The disruptive influence of the prolonged contract discussions in April was also reflected on by a PET buyer.

“To give an idea, I was negotiating prices with a customer of mine on Tuesday [2 May]. Which is already May. I was negotiating the April price. It makes no sense,” said the PET consumer.

Although it said it was not affected as significantly as others, the source added that for some market participants the main difficulty was that they did not know what to expect in regards to PX pricing for the month.

In addition, buyers of PX are not necessarily focusing on the same downstream trends as, for instance, some market participants negotiate deals for dimethyl terephthalate (DMT) while others settle PX contracts in order to produce PTA.

Although PTA is used to make PET, DMT is typically involved in the production of polybutylene terephthalate (PBT).

PX negotiations therefore do not have enough influence from PET participants, according to a producer from the latter market.

Indeed, there are only a handful of key buy and sell negotiators in the European arena, which this PET producer said was not enough.

It concluded that any PX settlements are devalued as a consequence.

It remains to be seen when the May contract price will be concluded, though the agreement from April is expected to go against a speedy outcome.

Pictured above: Reels of polyester, for which PX is a key component
Tim Graham/robertharding/REX/Shutterstock

Focus article by Jane Massingham

Additional reporting by Pavle Popovic

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By Jane Massingham