Insight Focus

  • Stronger crude values supported higher PTA futures versus the pre-holiday close.
  • PTA and MEG faces weakening downstream polyester demand on reduced production.
  • PET resin export demand remains slow, optimism remains for 2023 growth.

PTA Futures and Forward Curve

  • Although moving lower through the week, PTA Futures finished higher than the pre-holiday market close.
  • PTA supply tightness has eased slightly with higher PTA plant operating rates. However, continues to be constrained by tight PX supply.
  • PTA demand has weakened following China’s National Golden Week holiday as polyester plants reduced production, with only limited restocking.
  • Overall, weakening demand and greater PTA liquidity is expected to keep pressure on PTA-PX spreads.
  • The Jan’23 contract closed last week at a RMB 400/tonne discount to the current month.
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MEG Futures and Forward Curve

  • MEG port inventories increased bucking the trend in recent weeks as downstream polyester demand continues to slow.
  • As expected, polyester operating rates further reduced following the National holiday, and with supply slowly recovering the market looks set to lengthen adding pressure on MEG prices.
  • Several new Chinese MEG plants are also due to start-up in the coming months.
  • The MEG forward curve remains in contango, although flatter in recent weeks, with the Jan’23 contract now on par with the current month.
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PET Resin Export – Raw Material Spread and Forward Curve

  • Chinese PET resin export prices weakened on last week, averaging USD 980/tonne by Friday, down around USD 30/tonne on the pre-holiday market close, and USD 90/tonne for the month.
  • The weekly average PET resin–raw material physical differential also declined by USD 43/tonne on softer demand, to USD 135/tonne. By Friday, the daily spread was around USD 142/tonne.
  • The raw material forward curve remains in backwardation with the Jan’23 contract discount at USD 47/tonne.
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Concluding Thoughts

  • New sales and order intake at major PET exporters remains soft, with producers keen to hear new bids and discounting to fill orders.
  • Price levels for Dec’22 were heard at a USD 40-50/tonne discount to the current level.
  • The addition of new and restarted capacity coming onto the market in Q4’22 is expected to add weight to this downward pressure.
  • European buyers have indicated a willingness to import greater volumes into the region in Q1’23 but this has yet to translate into any noticeable change on the Asian sales side.
  • Latest financial results from PepsiCo, showed a continued strong beverage volume growth within Latin America and the Africa, Middle East, South Asia regions. All key target markets for Chinese producers.
  • Even if European Q1 demand is weaker than anticipated, many other target regions are still in COVID recovery mode and should continue to provide a good foundation for Chinese PET export growth in 2023.

For PET hedging enquiries, please contact the risk management desk at MKirby@czarnikow.com.  

For research and analysis questions, please get in touch with GLamb@czarnikow.com.  

Gareth Lamb

Gareth joined CZ in 2021 and is CZ’s PET analyst and recycling specialist. As well as regularly reporting on key market trends and dynamics, Gareth is also developing new research products and analytics within the PET and rPET space. Prior to joining CZ, Gareth led Wood Mackenzie’s PET research service and was Senior Consultant at IHS Markit, working within the petrochemical consulting team. Dr. Lamb graduated from the University of St Andrews with a PhD in organometallic chemistry; and has a masters of Chemistry degree from the University of Liverpool.

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