Counter bids for the April Asian Contract Price for paraxylene are seen to come in at around $1,050-1,100/mt CFR, sources close to the negotiations said Thursday.
The four PX ACP sellers in Asia — ExxonMobil, Japan’s Idemitsu Kosan and JX Nippon Oil and Energy, and South Korea’s S-Oil — released their nominations for April earlier this week, and counter bids from the six ACP buyers are due before the nominations expire next Monday.
JX and ExxonMobil Monday nominated their PX ACPs for April at $1,250/mt CFR, while on Tuesday S-Oil nominated at $1,260/mt CFR and Idemitsu at $1,270/mt CFR.
The six ACP buyers are BP, Taiwan’s Capco and Oriental Petrochemical (Taiwan) Corp., Japan’s Mitsui Chemicals and Mitsubishi Chemical, and China’s Yisheng Petrochemical. Sources close to the negotiations said their counter bids would be around $1,050-1,100/mt CFR, with a target settlement of $1,150/mt CFR.
“The Asian PTA market is now rising so it is quite possible to settle at $1,150/mt CFR,” a source at one ACP buyer said.
One source close to the negotiations said there is a high possibility that PX April ACP negotiations would end with a major settlement. “There was no settlement for February and March; both buyers and sellers will likely work hard to reach a settlement this time,” the source said.
Several sources said the nominations for the April PX ACP were reasonable at around $50-60/mt higher than the current spot price, indicating sellers were willing to reach a settlement for the month. “Typically PX ACP nomination values come in $100-200/mt higher than the spot price at that time. The nomination values for April are very reasonable,” one source said.
The ACP sellers are keen to settle for April in a bid to reduce high PX inventories. Asian PX producers currently have high stocks due to rapidly-diminishing demand in China amid falling operating rates by PTA producers grappling with negative margins. The run rates of Chinese PTA producers are currently reported at around 50-60% of capacity, down from 70% in early March.
“Some Chinese PTA producers are canceling PX deliveries. As a result, spot supplies in Asia has become heavy,” a trading source said. As a result, the CFR Taiwan/China PX marker sank to $1,151/mt on March 14, the lowest since October 11, 2010, when it was assessed at $1,133/mt.
The Asian PX market has started to recover this week but some market sources said the rebound would be modest. “The price increase is mainly because of gasoline rising in the future,” said a PX producer, adding: “PX demand from PTA producers in China is still very limited.”
PX SEEN TO REMAIN HEAVY FOR NEAR TERM
Market sources said the operating rates of PX plants in Asia would not fall quickly due to high feedstock costs and negative gasoline margins.
PX can be produced from a wide variety of feedstocks including mixed xylenes, toluene, heavy naphtha and reformate. A refinery source said bearish gasoline demand had resulted in high reformate inventory, which has been keeping PX operating rates high.
“Refineries need to use reformate feedstock. They are still able to make a small profit by producing PX rather than gasoline, so they are still running PX plants at high rates,” the refinery source said.
The PX-naphtha spread has been hovering at around $250-280/mt for the last few weeks, slightly higher than the breakeven level of $230/mt, according to Platts’ data.
Market sources said inventory levels of another key PX feedstock, naphtha, are also seen to be high, but refiners and petrochemical producers are continuing to buy naphtha due to good margins for olefins production.
Based on Wednesday’s CFR Northeast Asia ethylene and CFR Japan naphtha assessments by Platts, the ethylene margin is calculated at plus $186.50/mt.
Refineries and petrochemical producers typically import full-range naphtha — a mixture of light and heavy naphtha — on term contract basis.
“Even though we do not want it to, heavy naphtha keeps coming in. We only need light naphtha but we cannot just switch,” said another refinery source.
On the other hand, PX requirements by PTA producers have been falling due to the lower PTA plant runs in China. The country’s PX imports fell 20.2% month on month to 761,414 mt in February, latest Chinese customs data showed.
But a rebound in the Asian PTA market this week is seen likely to increase the willingness of ACP buyers to settle for April.
The CFR China PTA price benchmark rose $6/mt day on day to be assessed at $892/mt Wednesday. Early Thursday, discussion was heard at $895/mt CFR China.