Insight Focus
- PTA and MEG futures see short-term support from lower inventories and higher polyester rates.
- Beyond the China’s October Golden Week downstream demand may turn sour.
- PET resin export prices expected to continue to soften on lower raw material costs.
PTA Futures and Forward Curve
- PTA supply continues to be restricted by tight PX availability, as PX producers continue to cut operating rates and shut units. PX and PTA transportation has also faced disruption due to the recent typhoon.
- Polyester operating rates have seen a steady recovery in recent weeks, and are expected to be supported by some restocking in the run up to China National Golden Week holiday.
- However, overall downstream demand has been lacklustre at best. Beyond the October holiday polyester producers are expected to once again reduce rates.
- As a result, weakening demand and new PX and PTA capacities will ease market supply tightness in coming months.
- The PTA forward curve remains in backwardation with the Jan’23 contract at a RMB 464/tonne discount to the current month.
MEG Futures and Forward Curve
- Although the Sep’22 MEG Futures contract fell last week, the main Jan’23 MEG Futures contract remained flat, showing weaker short-term fundamentals in the expiring current month.
- MEG port inventories continued to decrease, down over 10% on the week and over 30% from the early-August high.
- The recent drop in inventory has been driven by falling MEG plant operating rates, as well as port congestion and slow discharges following the recent typhon.
- However, offtake at ports is now expected to slow as several major plants restart production, including Hengli Petrochemical, which unexpectedly shutdown 1.8 million tonnes of capacity mid-September.
- The MEG forward curve remains in contango, although the curve has begun to flatten in recent weeks.
PET Resin Export – Raw Material Spread and Forward Curve
- Chinese PET resin export prices decreased slightly last week averaging USD 1050/tonne by Friday, down around USD 20/tonne on the week.
- The weekly average PET resin–raw material physical differential increased USD 8/tonne, from the previous week to USD 173/tonne. By Friday, the daily spread settled around USD 171/tonne.
- Whilst remaining in backwardation, the raw material forward curve moved lower versus the previous week. The week closed with the Jan’23 contract showing a USD 53/tonne discount over the current month.
Concluding Thoughts
- With the forward curve remaining in backwardation through the remainder of H2’22, PET resin export prices are expected to continue to soften with producers experiencing lower raw material costs.
- With PET resin availability expected to lengthen through Q4’22, lower raw material costs will enable PET producers to price more aggressively.
- Current deals are mainly for October and November shipment; price levels for Dec’22 were heard at a USD 30-40/tonne discount to the current level.
- The addition of new and restarted capacity coming onto the market in Q4’22 is also expected to add weight to this downward pressure.
- European pre-buying is still expected to build through Q4, as freight rates continue to fall and export prices move lower. However, European raw material settlements in bother September and October may play a pivotal role in end volumes (see report).
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.
Other Insights That May Be of Interest…
PET Resin Trade Flows: Brazil seeks to Export More PET to North America
What Europe’s Deepening Energy Crisis Means for PET Resin
Plastics and Sustainability Trends in August 2022
European PET Market Stumbles as Producers Left Blind on Costs
