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From: Emerging Textiles
28 July 2008 -- Polyester intermediate prices are now reacting to the sharp decline in the crude oil prices in New York. Paraxylene dramatically fell in the last week on the Asian spot market while glycol was also significantly dropping. PTA less strongly declined thanks to a previous reduction in operating rates by major Asian suppliers. Polyester fiber prices are slightly down in China.
Polyester intermediate prices significantly fell in the last week, in line with the sharp drop in crude oil futures in New York.
Oil lost another US$7 over the week finally sliding US$22 from its peak two weeks ago at US$145.
The current fall in crude prices is apparently due to a decline in gasoline consumption in a series of developed countries.
Given the slowdown in production and the long-term rise in consumption, crude oil prices may however rebound to higher levels in the short term.
Paraxylene Plunged
After resisting in the prior week, spot paraxylene prices strictly followed crude oil prices, decreasing by US$135 per metric ton in the last seven days.
This is a very strong decline in such a short period of time and could give room for larger margins at PTA plants.
Spot PTA prices only fell US$35 on the Asian market (CIF China).
In theory, this would result in a gain of US$100 for PTA producers.
The Asian PTA industry started slashing its operating rates in the last two months, in line with a surge in paraxylene prices.
Production was suspended at a series of facilities in China and elsewhere in Asia, and this could allow PTA producers in limiting any reduction in prices.
Contract prices may however be subject to a sharp decline in the near term.
In China, July prices were settled at 9,600 yuan (US$1,406) per metric ton, a decrease of 900 yuan (US$132) from nominations and 350 yuan (US$51) from June settlement prices.
The fall in contract prices may be even stronger in August, as demand from polyester producers is not expected rebounding.
Glycol in Free Fall
Glycol prices seriously fell in the last week in China, losing 450 yuan on the spot market (US$49).
MEG prices even lost US$65 on the international market (CIF China), reflecting the weakness in demand and larger supplies than on the PTA market.
The glycol spot price in Asia even broke the level of US$1,000 per metric ton.
Contract prices of major global suppliers were nominated at US$1,260-1,300 in August, by contrast.
While chip prices were strongly falling, polyester fiber prices started slightly declining in China with a drop of 100 yuan reported over the period.
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