Asian polyester fiber chain prices were flat Tuesday, pressured by high inventories and weak sales, despite an announcement by India Monday to ban cotton exports, market sources said.
On Monday, India's Directorate General of Foreign Trade, or DGFT, prohibited cotton exports with immediate effect without providing a reason for the ban.
On Tuesday, cotton futures on China's Zhengzhou Commodity Exchange remained strong, after rising around Yuan 220-280/mt Monday. And on Tuesday May cotton futures ended the morning Yuan 85/mt higher at Yuan 21,250/mt ($3,368/mt), while September cotton futures finished Yuan 85/mt higher at Yuan 22,025/mt.
But despite the surge in cotton futures, Asian purified terephthalic acid prices remained relatively flat Tuesday morning, edging up just $4/mt from Monday's $1,210/mt. Market sources said the Asian PTA market continued to be dragged down by bearish polyester fiber sales in China.
The cotton import ban could mean an increase in demand for polyester, but so far, China's polyester market has remained bearish.
A market source said that China is one of the largest cotton producers in the world and will be able to cover the import shortfall from India from its own production.
According to a report from the US Department of Agriculture, China's cotton production in 2011-12 would be at 33.5 million bales, up 9.8% from 2010-11.
"The cotton inventory in China is still high and the fabric requirements are weak," another market source said.
Also, according to market sources, the sales-production ratio of polyester fiber is pegged around 50-80% currently down from 120% late last week. "So the sharp price increase for cotton futures is pure speculation," said a trader in China.
IMPACT ON PX LIMITED
Meanwhile, Asian paraxylene prices dropped $3/mt from Monday and were pegged at $1,680/mt CFR Taiwan/China Tuesday morning.
Market sources said the impact from India's cotton ban on the Asian PX market was limited as the price is already high compared with the downstream PTA market.
Last Friday, Asian PX hit $1,683/mt CFR Taiwan/Ningbo, its highest level since September 23, 2011.
PTA producers have been suffering negative margins since December last year. And with the current spot PX and PTA prices, PTA producers are suffering negative margins of $51/mt.
