Paraxylene market participants expect another tough round of negotiations for the Asian Contract Price for October amid tight PX supplies and a bearish downstream purified terephthalic acid market, sources close to the negotiations said Friday.
There are four PX ACP sellers in Asia -- ExxonMobil, Japan's JX Nippon Oil and Energy, Idemitsu Kosan and South Korea's S-Oil. This week, ExxonMobil nominated its October PX ACP at $1,560/mt CFR, JX and S-Oil at $1,550/mt CFR, and Idemitsu at $1,540/mt CFR.
Sources said negotiations for October would be "similar" to September. No settlement was reached for September as ACP buyers and sellers were unable to fill a $20/mt gap. Buyers held firm at $1,470/mt CFR, while sellers were unwilling to reduce below $1,490/mt CFR.
"It seems the October negotiations would be very similar with previous month," said a source close to the negotiations. "So far, buyers would not accept more than $1,460-1,470/mt CFR, while sellers are not interested in coming down below $1,480-1,490/mt CFR."
In the Asian spot PX market, the CFR Taiwan/China PX price benchmark has averaged $1,498.32/mt so far in September, down $8.98/mt from August. Despite this, sellers were unwilling to reduce their nomination values as underlying spot PX market was in a firm note, with active short covering by traders.
On the other hand, buyers were reluctant to accept sellers' price idea due to negative margins for purified terephthalic acid production. The Asian PTA margin is calculated at an average of minus $80.33/mt so far in September, compared with minus $54.50/mt in August, according to Platts data.
There are six ACP buyers, and all of them are PTA makers: BP, Taiwan's Capco, Oriental Petrochemical (Taiwan) Corp., Japan's Mitsui Chemicals and Mitsubishi Chemical, and China's Yisheng Petrochemical.
"Considering these, it is possible the ACP negotiators would not be able to reach a settlement," said one of the sources.
But some others said it would be a chance that the negotiators would reach a settlement.
"If no settlement for October, then the negotiators were not able to reach settlement for two months in a row and fourth time this year. It does not look good," said a source. "In that case, the negotiators would make efforts to reach a settlement for October."
ACP's credibility came into the spotlight last year as negotiators were not able to reach settlements for three times in 2012. Confusion occurred among PX market participants at the time about which formula to use in the absence of ACP settlement value.
ACP is widely used in the PX industry in Asia to settle term contracts or spot transactions.
The nomination values are due to expire next Monday.