Insight Focus
- PTA futures continued to fall, largely tracking the PX and crude markets.
- Having fallen sharply in recent weeks, PET export prices steadied last week on tight availability.
- Lower PET resin export prices are attracting additional forward interest from European buyers.
PTA Futures and Forward Curve
- PTA futures continued their slide, following PX and crude prices.
- Several PTA producers are expected to enter maintenance in July, supporting the PTA-PX spread.
- However, Chinese polyester producers may also decide to cut production in July due to lacklustre demand from the textile market, further dampening PTA demand.
- The PTA 12-month forward curve remains steeply backwardated into 2023.
MEG Futures and Forward Curve
- MEG futures fell further towards the end of last week, following the previous week’s sharp drop.
- Coal-based MEG producers cut output at some units due to low MEG prices.
- However, the market is likely to remain weak due to slow textile demand and persistently high inventory.
- The 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
- Chinese PET resin export prices flattened out last week, settling around USD 1190/tonne by Friday.
- Producers enjoyed higher margins, with the weekly average PET resin – raw material physical differential widening USD 28 to USD 144/tonne. Friday’s daily spread was higher still at USD 156/tonne.
- The PET export-raw material forward curve remains partially backwardated through Q3 2022, flattening out into 2023.
Concluding Thoughts
- With export demand helping to support overall PET resin sales through much of H1, resurgent domestic demand, following an easing of restrictions, is returning the favour.
- Although PET export margins have fallen 15-20% since April, PET export margins could stabilise through July and August due to tighter supply caused by strong domestic restocking.
- Whilst some short-term margin support may be evident, forward feedstock costs are expected to ease gradually through H2, pointing to continued softening in projected PET resin prices through Q3.
- However, with PET prices surging in the European market, and remaining high across the Americas, increased price competitiveness is expected to generate strong demand in Q4; following a similar pattern to Q4 2021.
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…
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Explainers That May Be of Interest…
