Asian polyester fiber chain prices continued to collapse Friday, as the markets stayed depressed due to a selloff across the products, triggered by a sharp downturn in paraxylene prices, market sources said.
On Thursday, the Asian PX market dived $24/mt from Wednesday to be assessed at $1,584.50/mt FOB Korea; and $1,609.50/mt CFR Taiwan/China. The market continued to be hit by heavy selling pressure Friday morning, travelling further south.
On Friday morning, the Asian PX market plunged $20.50/mt from Thursday and was pegged at $1,564/mt FOB Korea and $1,589/mt CFR Taiwan/China, the lowest levels since January 25 this year.
The selling pressure in the Asian PX market continued Friday morning, particularly for the May arrival laycan, as several traders were moving deepsea cargoes from the US to Asia.
According to market sources, a total of 10,000 mt of deepsea cargoes have already been fixed and some other traders were also seeking opportunities to do the same.
PX demand was also slashed by the latest run cuts by downstream purified terephthalic acid plants across Asia. The run cuts by PTA producers started to be visible recently, in line with worsening margins.
As of Thursday, PTA margins were calculated at minus $59.32/mt compared with minus $50.28/mt Wednesday.
"At the moment, it is very unclear where the bottom is," said a PX trader. "The whole polyester fiber market seem to have no confidence now," another PX trader said.
MEG, PTA TRACK PX
Meanwhile, Asia monoethylene glycol prices crashed through the $1,000/mt psychological barrier to hit a 16-month low Thursday. Asian MEG was assessed at $982/mt CFR China, down $37/mt day on day.
On Friday morning, MEG discussion levels were reported at $980-990/mt.
The CFR China purified terephthalic acid price was assessed at $1,161/mt Thursday, down from a one-month high of $1,211/mt on March 6.
On Friday morning, the CFR China price was pegged $10/mt lower at $1,151/mt, tracking bearish PTA futures on the Zhengzhou Futures Commodity Exchange. On the CZCE, most actively-traded September PTA futures plunged Yuan 138/mt from Thursday to Yuan 8,766/mt.
Market sources also attributed the sharp fall in MEG AND PTA prices to high inventory levels and poor demand.
Inventory levels at MEG storage tanks in the eastern Chinese ports are brimming at about 650,000-700,000 mt, market sources said.
The sources said that MEG cargoes arriving in China did not have tank space, and market participants were being forced to sell their in-tank cargoes to make room for their new cargoes -- to avoid incurring ship demurrage costs.
Even Chinese end-users were heard trying to sell some of their inventory Thursday.
"There's a severe oversupply right now," said a polyester maker.
MEG stocks have been building up as demand from downstream polyester factories has been lackluster.
Orders for polyester have been weak, amid a weak global economic outlook.
China's polyester and textile industries rely heavily on exports.
Polyester factories reported sales-production ratio of 60-70% this week, down from 80% last week.
"The textile industry is not doing good as orders are very low," said a market source.
Market sources also said PTA inventories are also high in China as polyester fiber markets built inventories, expecting a recovery in polyester fiber demand after the Lunar New Year holidays, which did not happen.
POLYESTER MARKETS SEEN WEAK
Polyester fiber markets typically peak over April-June, but so far high inventories have kept the markets bearish. This week, some polyester fiber makers reduced their sales prices by Yuan 200-500/mt in order to clear out high inventories.
In addition, polyester demand is seen to be gloomy in line with the slowdown in the Chinese economy.
Chinese futures and financial indices took a dip Wednesday, after Chinese Premier Wen Jiabao said at a press conference that property prices were "still far from returning to reasonable levels." This caused property stocks to fall, dragging down the benchmark index with it.
Besides, India, the world's second-largest cotton producer, has also partially lifted a ban on cotton exports a week after it was first introduced March 5.
Polyester is used as an alternative to cotton and the ban had initially supported a price increase in MEG early March.
But the reversal of the ban has also added downward pressure on MEG prices. Market sources, however, said this was "not much," compared with the already high inventory levels.
