– China VAT pushes prices down
– PX supply scenario may change
Domestic Chinese purified terepthalic acid, or PTA, futures prices came under further pressure on Monday, falling Yuan 130/mt to Yuan 6,330/mt from the Friday close during the morning session and another 2.54% fall to Yuan 6,296/mt during the afternoon session. Falling PTA domestic Chinese PTA prices put downward pressure on Asian PX prices and traders felt that the fall in prices was in continuation from last Friday’s drop in values, which occurred in response to the Chinese government’s announcement that it was lowering value-added tax to 13% from 16% starting April 1. Traders said that there were no visible bids or offers in the market on Monday morning, and offers and bids on PX paper for more prompt months were scarce. Market sources reported one Q4 paper trade done at $1,010/mt, but quantity of the trade could not be verified. However, market players were bearish on prices and felt that PX prices could have some room to go down. One source felt the market structure, which was currently backwardated between June and Q4 on supply expectations, may start to unravel and even go into a contango structure. The reason for the change in structure could be due to a couple of reasons, including the change in China’s domestic VAT and some PTA plants that will be coming online.
Asian PX prices down $19.17/mt day on day at $1,084/mt CFR Taiwan/China and $1,065/mt FOB Korea Monday. The markers take an average of the H1 May, H2 May and H1 June laycans. The H1 June laycan was assessed at $1,080/mt CFR Taiwan/China, below an outstanding open origin June offer from Yisheng at $1,080.50/mt. The May laycans were assessed at $1,086/mt, between an outstanding offer from OTI at $1,090/mt and a bid from Mercuria at $1,066/mt, maintaining a $6/mt spread between May and June. The above rationale applies to the following market data codes: “PHASS05” for FOB Korea and “AAQNE00” for CFR Taiwan/China.