Insight Focus
PTA futures steadied as crude also parred losses, supported by increasing downstream polyester production.
Asian PET resin export prices steadied with only a USD 10/tonne premium on the raw material forward curve.
However, Asian PET resin export margins and prices are expected to retreat once again into the off-season.
PTA Futures and Forward Curve
PTA futures ended the week with a smaller percentage gain, breaking recent consecutive weekly declines.
Likewise, although Brent crude oil prices fell back below USD 80/bbl last week, by Friday’s close Brent was still up around 0.5% for the week despite the end of week slump.
Through the chain, PX fundamentals continued to weaken on increased overseas and domestic supply, with the PX-N spread shrinking by as much as USD 30/tonne last week.
PTA-PX CFR spread also narrowed, albeit very slightly, by around USD 3/tonne, remaining compressed at an average of just USD 71/tonne.
PTA operating rates have gradually recovered over the last couple of months, from the lows seen in May, whilst polyester demand has lagged, weakening the supply/demand balance.
Although there are limited upcoming maintenance plans further PTA inventory accumulation looks likely to be contained as the polyester downstream industry moves towards its traditional peak season, late-Sept/October, and PET bottle resin production also rebounds.
The PTA forward curve held a slight forward premium; Jan’25 had a RMB 44/tonne premium over the Sept’24 contract.
MEG Futures and Forward Curve
Much like the PTA futures, having rebounded from mid-week lows, MEG Futures also recovered with a small positive weekly percentage gain by Friday.
East China main port inventories were stable, increasing by around a tenth of a percent to 621k tonnes.
Whilst MEG cargo arrivals have been relatively low in early August, arrivals are expected to increase later in the month. However, news of an unexpected shutdown in the US may moderate future MEG exports.
Overall, MEG fundamentals remain healthy, further maintenance turnarounds in August will keep supply tight, increasing polyester operating rates will also support demand in the medium term.
The MEG forward curve remained relatively flat through to Q2’24. Forward premium kept steady, with the Jan’25 contract having a RMB 48/tonne premium over Sept’24.
PET Resin Export – Raw Material Spread and Forward Curve
Chinese PET resin export prices followed raw materials lower last week, keeping relatively steady at an average of around USD 885/tonne by Friday.
The average weekly PET resin physical differential against raw material future costs decreased by USD 2/tonne to plus USD 11/tonne last week. By Friday, the differential had increase to plus USD 15/tonne.
The raw material cost forward curve remains comparatively flat, although has started to show a very slight forward premium, with a USD 10/tonne premium through from Sept’24 to May’25.
Concluding Thoughts
Although last week the market experienced some volatile daily price swings, by Friday spreads and pricing across the PET value chain had in large returned to their previous state.
The raw material forward curve remains relatively flat through the next 12-months, with medium-term Asian PET resin export prices to be almost entirely determined by producer margins and S/D dynamics.
Recently we’ve seen a short-term recovery in the physical differential over raw material futures due to reduced supply, and robust export activity, including a flurry of larger breakbulk shipments.
However, as we move into off-season another wave of new capacity is planned (4 million extra in the remainder of 2024 alone). Not all of this will come to fruition, and some older lines continue to be shuttered.
Nevertheless, Asian PET resin export margins and prices are expected to retreat once again and remain supressed through H1’25.
A spate of anti-dumping legislation in key export markets this year, including Mexico, India, South Korea, and most recently Malaysia, will also weigh on export demand, leading to the spread being lower for longer.
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.
