Insight Focus
- PTA futures hit record highs driven by surging crude oil, PX prices.
- PTA margins come under pressure as producers struggle to pass on PX costs.
- PET resin export margins are expected to stabilise, recovery to April/May levels unlikely.
PTA Futures and Forward Curve
- PTA futures soared last week, with the main September contract closing up over 13% on the week due to a sharp increase in PX prices.
- Rising PX prices are now expected to heap pressure on already struggling PTA margins.
- Whilst PTA supply is expected to increase in June, additional production cuts and maintenance have been announced for July due to poor economics.
- The PTA 12-month forward curve remains backwardated, falling away sharply from August into 2023.
MEG Futures and Forward Curve
- MEG futures rose modestly last week, more bullish than in recent weeks but remaining rangebound.
- Despite lower operating rates, the market remains fairly balanced, with ample supply and port inventories slow to decrease.
- MEG forward curve remains in contango, with future contracts trading at a premium to current prices.
PET Resin Export – Raw Material Spread and Forward Curve
- Having made an initial jump on Monday’s reopening, export prices for Chinese PET resin followed raw material prices higher through the week to over USD 1315/tonne FOB by Friday.
- However, higher feedstock prices have eroded the PET resin physical differential for exports, dropping to just USD104/tonne from USD 172/tonne in May, back to levels not seen since January.
- The PET export-raw material forward curve remains flat through Q3 2022, then slightly backwardated into early 2023.
Concluding Thoughts
- Rapid increases in feedstock costs are squeezing both PTA and PET resin margins.
- Having fallen sharply in recent weeks, PET resin export margins are expected to stabilise, or even rise slightly in the next few weeks; recovery to April/May levels is unlikely and would not follow previous seasonal trends.
- PET resin supply is expected to grow through June with the easing of restrictions and improvement in logistics and trucking availability.
- Whilst major Chinese exporters are sold-out through June and July, forward availability is expected to grow steadily.
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.
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Explainers That May Be of Interest…
