The PX ACP, negotiated monthly between four PX producers and five PTA makers, failed to settle for the second time this year. The previous non-settlement was in March.
In the event of a non-settlement, the Platts monthly average spot price is typically used in lieu of the ACP. As such, PTA makers felt that they had to actively take part in the May spot market.
On Monday, during the Platts Market on Close assessment process, a June cargo was traded at $1,450/mt CFR Taiwan/China between Japanese trader Mitsui and Chinese trader China Aviation Oil. Following the deal, three Chinese PTA producers -- Yisheng, Hengli and Shaoxing Yuandong -- offered June cargoes at $1,440/mt CFR China (for one main port) off-screen.
One of the PTA makers explained that they were selling off their contract feedstock due to low operating rates.
"The polyester lull season is coming up and our operation will be affected," he said, adding that current run rate at his 3 million mt/year PTA plant was 60%.
"It is difficult for PTA makers because we have no say in either the PX or the PTA price," the PTA maker added. "Since we are producers, we always try to avoid meddling in the spot market, but we feel we have to be more active these days to protect ourselves."
Negotiations for the May ACP fell through despite JX Nippon Oil & Energy reducing their May nomination to $1,425/mt CFR, down from $1,520/mt CFR initially. PTA makers had dug in their heels, insisting on $1,400/mt CFR, a rollover from the April ACP, according to sources close to the ACP negotiation process.
From May 1-13, the Platts average spot price is $1,438.75/mt CFR Taiwan/China while the PTA average price was $1,045.25/mt CFR China. Based on the spot PX price, PTA makers need to break even at $1,099.58/mt based on a PX conversion factor of 0.66 and a conversion cost of $150/mt.
A Chinese PX trader felt that the sell-off by PTA makers might not necessarily affect the spot price.
"They are producers after all and have limited trading avenues," he said. "PX will need to fall but ultimately, prices will depend on PTA operation rate."
