Slow start to 2014 paraxylene term talks expected to be protracted

22-Nov-13

Annual paraxylene term negotiations for 2014 have gotten off to a slow start in Asia, and talks are expected to be drawn out, as the supply/demand fundamentals are expected to change significantly halfway through next year, as per sources involved in the negotiations in Platts. The term negotiations are led by the big four producers in Asia -- South Korea's GS Caltex and SK Innovation, and Japan's Nippon Oil and Energy and Idemitsu Kosan -- while the buyers are mainly Chinese producers of purified terephthalic acid. According to sources, JX and Idemitsu have made initial offers at a premium of US$7.50/mt to a typical pricing formula which consist 50% of Platts CFR Taiwan/China PX assessments and 50% of the monthly Asian Contract Price settlements. SK, meanwhile, has made an initial offer at a premium of US$5/mt to the pricing formula. The nomination levels are unchanged from the 2013 term contract prices. Discussions have been slow so far, said sources. Typically, the producers reveal their nominations during the annual conference of European Petrochemical Association [in early October]. But it seems JX was the only one who revealed its nominations during the conference. Since nominations from the South Korean producers have just started to come in, buyers have been reluctant to place counterbids. Demand and supply situation is expected to change dramatically next year, making it difficult for buyers to place bids. The Asian PX market is expected to shift from tight this year to a likely supply overhang next year, particularly in the second half, due to new PX plant startups. In India, state-owned Oil and Natural Gas Corporation plans to start up its 900,000 tpa PX plant in New Mangalore during February or March. In the Middle East, Saudi Aramco Total Refinery and Petrochemicals Company plans to start up its 700,000 tpa PX plant in Jubail, Saudi Arabia, next January. In South Korea, SK and JX plan to start up a 1 mln tpa PX joint venture plant in Incheon in Q2-2014. With these startups, PX supplies are expected to rise toward H2 next year, which makes it difficult for the term negotiators to agree on a single premium. One PX supplier said there may be an option to have two different premiums -- for H1 and H2 -- reflecting the dramatic shift in supply/demand fundamentals.