Insight Focus

  • PTA futures drop as global commodities ease, producers face margins loss.
  • Typhoons cause delays and congestion at Chinese ports.
  • Approaching peak polyester season may provide crucial support for PTA and MEG.

PTA Futures and Forward Curve

  • PTA futures followed the mid-week dip in global commodities markets. However, failed initially to respond to crude’s rebound on Friday morning, as the oil market regained upward momentum.
  • Crude oil analysts are predicting global supply deficits will continue until the first quarter of 2024, leading to falling inventories and higher oil prices, some predicting $100/bbl by year-end.
  • Typhoon disruption continues to be a threat to PTA supply, as Typhoon Kanu currently bears down on eastern ports, following on the back of Super Typhoon Doksuri.
  • Container operations in Ningbo-Zhoushan, and some smaller ports on the Yangtze face are likely to be impacted, with some lifting and barges suspended.
  • Whilst PTA availability is currently experiencing limited impact, congestion at Chinese ports is expected to remain elevated in coming weeks.
  • The PX-PTA spread narrowed further, dropping below USD 100/tonne, indicating losses for PTA production, as PTA plants operate at high rates following earlier maintenance shutdowns.
  • However, downstream polyester demand remains robust providing support to PTA, despite significant pressure on textile exports.
  • Operating rates are expected to remain high through the next quarter, with peak polyester season approaching, late-August through to October.
  • By Friday the Jan’24 contract was trading at a RMB 74/tonne discount to the current month.

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MEG Futures and Forward Curve

  • MEG Futures fell heavily last week as recent support from the continual rise in crude oil prices put into question following interest rate rises from the FED and BoE.
  • The current MEG market currently lacks momentum, a heavy wave of new import arrivals expected in August will continue to add pressure on the market.
  • Main port inventories increased very slightly, rising 0.14% to 987k tonnes last week, and are forecast to rise to their highest levels this year over the next month.
  • Traditionally, peak season for polyester leads to a rapid consumption of port inventory. However, with high downstream textile inventories, the MEG market may see a repeat of last year’s relatively lacklustre demand.
  • The MEG forward curve remains in contango over the next 12-months, although the forward curve has flattened over the last week. By Friday the Jan’24 contract was holding a RMB 54/tonne premium to the current month.

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PET Resin Export – Raw Material Spread and Forward Curve

  • Chinese PET resin export prices started on a stronger note on Monday, rising to an average of USD 920/tonne, before following raw materials lower through the week to an average of USD 900/tonne by Friday, representing a USD 10/tonne weekly decrease.
  • The weekly average PET resin physical differential to future feedstock costs increased marginally, up USD 5/tonne to average USD 9/tonne for the week. By Friday the daily spread had recovered further to USD 17/tonne.
  • The raw material cost forward curve, whilst moving downwards, remains relatively flat through the next 12-months. At Friday’s close, Jan’24 raw material costs were at a USD 7/tonne discount to the current month.

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Concluding Thoughts

  • The relatively sharp downturn in PTA and MEG futures outpaced PET resin price movements leading to a slight recovery in physical differential over future costs.
  • However, given the ample availability of material margins are expected to remain compressed.
  • If Friday’s recovery in crude oil sustains into next week the physical differential may well reverse, keeping rangebound as these low levels.
  • Export sales have been slow through July and into early August, with producer stocks edging up slightly, although still averaging below the two-week level.
  • Producers are now keen to make additional export sales to slow any potential inventory build entering the off-season.
  • Further additions from Yisheng (500kta) and Billion (600kta) are expected to keep margins low through H2’23.
  • As a result, PET resin export prices are expected to track raw material costs closely through to Q1’24.

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.  

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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