Insight Focus

  • PTA and MEG Futures prices ended the week lower, with COVID controls weakening polyester demand.
  • PET resin export premiums narrowed, with buyers facing worsening logistics and delays.
  • Raw material forward curve remains flat, with slight backwardation over next 12 months.

 

PTA Futures and Forward Curve

  • The PTA futures market initially pressed higher following China’s Tomb Sweeping holiday on the 4-5th April, but reversed gains through the back of the week, following lower crude prices.
  • Despite recent PTA production cuts, current COVID restrictions are precipitating weaker demand.
  • Polyester fibre producers are looking to reduce operating rates, following higher inventory and weak apparel orders; FENC have also reduced PET bottle-grade resin production in Shanghai.
  • The PTA 12-month forward curve remains in backwardation, with future months trading at a discount to the current April contract.

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MEG Futures and Forward Curve

  • MEG futures softened through the week.
  • Reduced polyester production and high inventories kept market sentiment subdued.
  • The MEG forward curve remains in contango with future contracts trading at a premium to current levels.
  • Additional MEG production cuts amid poor margins and weak demand may help improve supply/demand, but the market is set to remain weak in the near term.

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PET Resin Export – Raw Material Spread and Forward Curve

  • With China’s PET resin export prices closing the week at 1,195 USD/mt, the current premium over feedstock futures has fallen by around 10 USD/mt to 122 USD/mt.
  • The PET export-raw material forward curve remains flat, slightly backwardated over the next 12 months.

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Concluding Thoughts

  • China’s daily COVID cases are skyrocketing but remain relatively low compared to many other countries.
  • Chinese authorities continue to crack down on outbreaks, with Shanghai’s lockdown now extended indefinitely.
  • Work-from-home orders are also increasingly common, most recently in Guangzhou.
  • PET resin producers are now faced with the prospect of weaker domestic demand and a slowdown in new export orders.
  • Beyond April/May, export demand should soften with lower sales to Russia and Ukraine, as well as fewer European enquires.

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: China’s COVID Response Slows Exports 

Chinese PET Industry Faces Biggest COVID Outbreak Since 2020 

European PET Market Rocked by War in Ukraine 

PET Resin Trade Flows: Europe Awaits Asian Shipments 

Explainers That May Be of Interest…

Czapp Explains: Europe’s First Plastic Packaging Tax 

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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