Insight Focus
NEW Bottle-Grade PET Resin Futures Launch on China’s ZCE Exchange.
Raw material and resin futures tumble as crude collapses as economic outlook worsens.
Asian PET resin export prices drop to a 12-month low, buyers hesitant unsure of market bottom.
PTA Futures and Forward Curve
PTA futures collapsed by over 7% across main contract months extending over the next 12-month, driven by crude’s downward spiral and continuing weakness in the PX market.
Brent crude fell below USD 73/bbl for the first time since Dec’23 erasing all gains made so far in 2024, despite OPEC+ members reaching a deal to delay the unwinding of its production cuts.
Concerns over demand in US and China are partially behind this move.
The PX-N spread narrowed by as much as USD 30/tonne again last week, following supply recovery and demand weakness. Whilst the PTA-PX CFR spread remained relatively steady, with the weekly average around USD 76/tonne.
Looking forward, increased PTA inventories and caution from downstream buyers amid a falling market is likely to kept pressure on PTA margins.
That said, increasing polyester operating rates brings positive support, potentially keeping further margins compressed but stable in the near-term.
The PTA forward curve premium increased modestly; Jan’25 had a RMB 126/tonne premium over the Sept’24 contract, with Mar’25 at RMB 174/tonne premium over Sept’24.
MEG Futures and Forward Curve
MEG Futures also fell sharply last week, tracking falling crude, as market sentiment also turns bearish on peak season demand expectations.
This comes despite, import arrivals remaining limited, with East China main port inventories down around 13.7%, to 583k tonnes by last Friday.
However, deep-sea arrivals are expected to increase from mid-month. Coupled with rising domestic production, further inventory reduction is likely to slow, moving to accumulation by November.
Ahead of the October national holiday, tight supply and increasing polyester operating rates are expected to keep MEG fundamentals stable in the short-term.
The MEG forward curve remained relatively flat through to Q2’24, although the Jan’25 contract holds a RMB 40/tonne discount over Sept’24, and May’25 a RMB 14/tonne discount.
PET Resin Export – Raw Material Spread and Forward Curve
As with raw material prices, Chinese PET resin export prices also felt the brunt of the global commodity shock, dropping USD 35/tonne to USD 835/tonne by Friday. Representing one of the largest weekly declines seen so far in 2024.
The average weekly PET resin physical differential against raw material future costs increased by USD 12/tonne to minus USD 12/tonne last week. By Friday, the differential had increased to minus USD 7/tonne.
The raw material cost forward curve has moved steadily into contango in recent weeks, with Jan’25 feedstock costs holding a USD 13/tonne premium over Sept’24, and May’25 a USD 20/tonne premium.
***NEW PET Resin Futures and Forward Curve
Last Friday (30th Aug), China’s Zhengzhou Commodity Exchange (ZCE) launched the new Bottle Grade PET Resin Futures.
Six contracts have initially listed from Mar’25 to Aug’25. Further contracts will be added with every new calendar month, until a full 12-months of forward contracts are listed; Sept’25 will be the next.
After the first full week of trading, the Mar’25 contract closed at RMB 6,214/tonne (USD 877/tonne), a USD 22/tonne premium to current physical China PET Resin export prices.
The PET Resin Futures forward curve shows a small RMB 78/tonne (USD 11/tonne) premium between the Mar’25 and Aug’25 contracts. Although current trading volume for contacts beyond Mar’25, the first contract month, is still extremely limited.
The PET Resin Futures also holds a USD 16/tonne premium over the Mar’25 raw material futures.
For PET hedging enquiries, please contact the risk management desk at MKirby@czarnikow.com.
Concluding Thoughts
Asian PET resin producers have been unable to hold price levels amid a sharp fall in raw material prices over the last two-weeks.
Despite recent strong export volumes out of China, a rapid decline in Asian PET resin prices at the beginning of off-season in the Northern Hemisphere is also leading to buyer hesitancy.
A wave of new capacity start-ups in September and October will heap continued pressure on spreads and producer margins.
Looking forward, and supported by the new PET Resin Futures, Asian PET export prices are expected to experience a seasonal near-term bottom over the next month then potentially rise into the New Year.
For research and analysis questions, please get in touch with GLamb@czarnikow.com.
