Insight Focus
- PTA and MEG Futures prices softened as COVID controls weakened polyester demand.
- PET resin export premiums moved up as logistics disruption tightened short-term availability.
- Loss of export volume to Russia and Ukraine expected to be felt beyond April/May.
PTA Futures and Forward Curve
- The PTA futures market closed lower for the week on Friday, driven, in part, by softening crude prices following ceasefire talks in Ukraine and a massive release in US crude reserves.
- Lockdowns and COVID controls in China are also resulting in weaker polyester demand from fibre producers, as apparel orders suffer with restrictions.
- PTA production cuts of 25% have been announced by at least four major producers, which may tighten supply and support prices in the near term.
- The PTA 12-month forward curve remains in backwardation, with future months trading at a discount to the current April contract.
MEG Futures and Forward Curve
- MEG futures drifted lower through the week.
- With margins in negative territory, some producers have either announced production cuts or entered maintenance periods.
- Despite high inventory and weaker polyester demand, the forward curve remains in contango with future contracts, trading at a premium to current levels in the hope of improved supply/demand.
PET Resin Export – Raw Material Spread and Forward Curve
- With China’s PET resin export prices closing the week at 1,220 USD/mt, the current premium over feedstock futures has risen slightly by around 8 USD/tonne to 141 USD/tonne.
- The PET export-raw material forward curve remains flat, with minimal backwardation over the next 12 months.
Concluding Thoughts
- COVID controls within China have not only shaken logistics, but a retrenched consumer base is leading to weaker domestic demand prospects.
- The recent slowdown in deliveries to the main ports of Shanghai and Shenzhen have tightened resin export availability amid already low inventory levels.
- PET resin export premiums should remain firm in the short term as a result.
- Beyond April/May, export demand should soften with lower sales to Russia and Ukraine, as well as fewer European enquires.
- Continued tight availability across the Americas means there’s opportunity to absorb volumes exists elsewhere.
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…
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
What the Ukraine Crisis Means for PET
Explainers That May Be of Interest…
