Trade Resources Industry Views Term Contract Discussions Are at a Stalemate Over a Failure to Agree on a Pricing Formula

Term Contract Discussions Are at a Stalemate Over a Failure to Agree on a Pricing Formula

Term contract discussions between Asian purified terephthalic acid producers and end-users are at a stalemate over a failure to agree on a new pricing formula, industry sources said Friday. 

The two sides typically finalize their term contracts for the coming year in December, but discussions have dragged into January this time as end-users continue to resist a new paraxylene-linked pricing formula proposed by producers. 

PTA producers have proposed changing the basis of the PTA term contract formula in a bid to pass on high PX feedstock costs. 

The PTA margin averaged minus $54.62/mt over 2012, compared with plus $88.33/mt in 2011, and sank to a all-time low of minus $109.11/mt on September 12 last year due to high PX feedstock costs. 

The margin had improved but remained in negative territory at minus $46.25/mt Thursday, and industry sources said they expected the margin to remain negative throughout 2013. 

"The Asian PX price will likely ease this year as supply will increase because of the startups of new PX plants, but I am not optimistic about the PTA market outlook," a PTA producer said. 

"The Asian PTA market will likely also become weaker in 2013, tracking the bearish PX feedstock market, so the [PTA] margin will stay negative." Sources said the proposed new PTA term contract formula will be calculated based 50% on the prevailing PTA spot price and 50% on the price of PX, which will be calculated based 50% on the Asian Contract Price and 50% on Platts CFR Taiwan/China assessments. 

Some producers were also reported to have proposed using the PX-linked PTA cost calculation formula as a floor price -- the PX price multiplied by a 0.66 conversion factor plus a $150/mt processing cost. 

Industry sources said it remained unclear when the parties would be able to reach agreement. 

"If we are not able to agree, then we have to sell PTA in the spot market," a second PTA producer said. 

Source: http://news.chemnet.com/Chemical-News/detail-1792995.html
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Asian Pta Term Supply Talks at Stalemate Over Px-Linked Pricing Formula
Topics: Chemicals