The Asian paraxylene market dived $44/mt, or 3.5%, from Thursday's close to be pegged at $1,214/mt CFR Taiwan/China early Friday despite China's interest rate cut, as market sentiment continued to be dampened by global economic fears, market sources said.
Early Friday, offers of spot PX cargoes fell quickly to $1,235/mt CFR Taiwan/China for August from $1,300/mt CFR Taiwan/China initially. But that did not stimulate buying appetite, with bids hovering at $1,190/mt CFR Taiwan/China for August.
On Thursday, China said it would cut interest rates for the first time in more than three years in a bid to stimulate growth in the world's second largest economy. The People's Bank of China will from Friday cut the benchmark one-year lending rate by 0.25 percentage points while the one-year deposit rate will fall by the same amount.
But the announcement did little to stimulate demand from the downstream purified terephthalic acid market in China.
On China's Zhengzhou Commodity Exchange Friday, the most actively-traded September PTA futures contract fell Yuan 194/mt from Thursday to end the morning session Friday at Yuan 7,098/mt. Market sources said China's PTA market was pressured by persistent bearishness in the polyester market.
China's polyester market has remained sluggish this year, hit by weakening exports to Europe amid the eurozone crisis. Sources said Friday they expect the polyester market to remain under pressure following news that Fitch Ratings Thursday downgraded Spain's credit rating by three notches to "BBB" from "A" with negative outlook.
Sources said Chinese traders who export polyester to Europe were facing cash flow problems due to falling exports, and were trying to defer payment to Chinese producers.
"Such traders are asking Chinese producers for payment after delivery. But the producers do not agree with it, which is making the polyester export situation even worse," said one source.
As such, polyester supplies in China have been increasing, resulting in weaker domestic prices. Polyester chip prices in China were pegged at around Yuan 9,150/mt Friday, down from Yuan 10,000/mt late May.
