Petrotahlil - Discussions for spot imports of phthalic anhydride (PA) took a positive turn this week in China and may continue to gather pace if uptick in downstream offtake is sustained.
Nearly 1,000 tonnes of northeast Asia-origin materials were sold this week at or close to $600/tonne for late September/October delivery to China, market sources said.
With this, the bulk of September spot volumes are sold out, and limited volumes left on the market had reportedly drawn higher bids - “at least $10-20/tonne higher on week” - according to a trader.
Average CFR (cost-and-freight) China Main Port (CMP) prices have languished at $565/tonne for much of August, a far cry from the peak of $840/tonne CFR CMP this January, ICIS data shows.
Prices have slumped thus far as downstream demand was ravaged by the coronavirus pandemic.
“But it seems the worst is over,” the same trader said.
Based on data tracked by ICIS, average operating rates at downstream unsaturated polyester resins (UPR) plants in China have hovered near the 40% mark in the last few weeks.
“By recent years of China’s track record, this is a positive sign and a booster for consumption of PA,” the trader added.
PA is used as a chemical intermediate in the production of UPR, as well as phthalate plasticisers, both of which have heavy applications in the construction sector.
Construction sector, in turn, is one likely beneficiary of China government’s recent push to bolster its slowing economy with a major infrastructure development campaign, among other initiatives.
“This will definitely drive UPR makers’ demand for feedstock PA,” a regional supplier beamed, adding that it will in turn help lift CFR CMP trade talks moving forward.
From the supply angle, spot availabilities are also limited for the rest of the year, which could also provide additional upside booster for spot talks, market players said.
The near-term outlook for PA spot trade in China is looking discernibly brighter, compared with last few weeks.
A total of 160,000 tonnes/year of regional PA capacity will go offline in the October-November window for scheduled maintenance.
In addition, the region has lost 60,000 tonnes/year of nameplate production capacity, after South Korea’s LG Chemical shut its PA unit from August, in part as a follow-up to its earlier downsizing of downstream plasticiser production capacity.
Even though the closure of LG Chemical’s PA plant followed mainly only the loss of domestic captive requirements, market players said that this would still create some spot supply gaps in the region.
This development weakens “my bargaining position with sellers,” a potential buyer conceded.
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Source : ICIS