Asian PX: Plunges $36.08/mt on day as buyers stay on the sidelines

Chemical Industry

– No trades as buyers stay away

– Jun/Jul structure widens to $7/mt on day

Asian PX prices were assessed down $36.08/mt day on day at $1,006.42/mt CFR Taiwan/China and $987.42/mt FOB Korea Thursday, as July offers fell, as buyers stayed on the sidelines amid expectations of an oversupplied market ahead. “There was no support at all, with major buyers staying away to observe the market, causing sellers to panic sell,” said a trader. After the declaration of May cargoes on Thursday, traders holding onto excess volumes realized that Asian PX spot supply was a lot longer than previously expected, causing participants to panic sell, a source said. Also, with an expectation of oversupply in the Asian June market due to the impending commercialization of PX cargoes from Hengli Dalian, traders were mostly reluctant to commit to buying on a fixed priced basis, and instead were bidding on a floating formula basis, a source said. “It seems that the June shorts were mostly for Asian origin material, coming from mostly just two major buyers, Hengli and Taiwan’s Formosa Chemicals and Fibre Corp., who have both now filled their shorts, sending the market into a free-fall,” said another trader. “Everyone was holding May cargoes waiting till the last minute, only to realize there were no buyers in the market, and so had to roll over their short positions into June.” In addition, there were talks that a lack of tank space at Ningbo and Dalian had forced some traders to divert their May cargoes to alternative ports such as Jiangyin and Zhuhai. Traders expect the situation to persist into the next month. During the  Market on Close assessment process Thursday, an outstanding June offer from Oman Trading International at $1,030/mt remained at the end, with no market participants expressing any interest, while an outstanding July offer from Yisheng at $1,002/mt also failed to attract buying interest. The June/July backwardation was assessed at $7/mt Thursday, below an outstanding June/July timespread offer from Yisheng at $8/mt, while earlier in the day, June/July timespread bids were seen at $6/mt. “The collapse in July pricing will entice more bids from traders to swap July for June, causing the June/July backwardation to widen further in the coming week,” said a trader.

RATIONALE:

Asian PX prices were assessed down $36.08/mt day on day at $1,006.42/mt CFR Taiwan/China and $987.42/mt FOB Korea Thursday. The markers take an average of the H1 and H2 June, and H2 July laycans. The June laycans were assessed at $1,008.75/mt, below an outstanding offer from Oman Trading International at $1,030/mt. The H1 July laycan was assessed at $1,001.75/mt, below an outstanding July offer from Yisheng at $1,002/mt, and at a $7/mt backwardation to the June laycans, below an outstanding June/July timespread offer from Yisheng at $8/mt. The above rationale applies to the following market data codes: “PHASS05” for FOB Korea and “AAQNE00” for CFR Taiwan/China.

 

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