The backwardation structure in the Asian paraxylene market narrowed to $2/mt Thursday from $5/mt Wednesday as front-month laycans were seen to be weaker than back-month and amid heavy spot PX selling by Chinese purified terephthalic acid producers, Platts data showed.
Early Friday, the structure was seen to turn flat, reflecting the latest H2 June/July spread bid and offers. Thursday night, a bid for H2 June/July was heard at minus $2/mt on a CFR basis, indicating the market is in contango, while an offer for the H2 June/July spread was heard at plus $2/mt, which would indicate backwardation.
The Asian PX market has been in a backwardation structure since December 23, 2011, as typical short covering by traders kept front-month laycans higher than back-month. But this week, the backwardation structure narrowed as selling by Chinese PTA producers capped the upside of the front month.
On Thursday, major PTA producers in China -- Yisheng, Shaoxing Yuandong, Xianglu, and Tongkun -- were trying to sell their spot PX cargoes for front-month June arrival. The best offer from the PTA producers for June was reported at $1,430/mt CFR, while the best offer for July was heard at $1,435/mt CFR.
Chinese PTA producers -- who usually buy PX in the spot market -- turned PX sellers this week in a bid to reduce their high inventories.
"The producers are also trying to improve PTA margin by pushing PX price lower," a Japanese trader said.
The Asian PTA margin was calculated at minus $46.14/mt Thursday, compared with minus $44.45/mt Wednesday.
Some market sources said the Asian PX market was unlikely to flip to contango.
"Chinese PTA producers do not want to push down the PX market sharply, which may push down PTA price as well," said the trader.
Another trader said: "Chinese PTA producers are comfortable with the PX price at $1,420-1,430/mt CFR."
On Thursday, the CFR Taiwan/China PX price was assessed at $1,429/mt. Early Friday, the CFR Taiwan/China PX price was pegged at $1,426/mt.
