PET Raw Material Futures Outlook: PET Resin Export Prices Lifted by Tighter PX and PTA Supply

Maintenance shutdowns lend near-term support to PTA and MEG futures.
Forward curve for raw material costs moves increasingly into backwardation.
Schedule and ramp-up of new capacity additions key to price outlook over the coming months.

PTA futures rallied last week on tighter PX and PTA availability, diverging from the recent fall in crude oil prices.
PX and PTA has entered turnaround season, with a string of major producers scheduling maintenance shutdowns between now and mid-May. Start-up of CNOOC Daxie’s new 1.6Mt PX plant has also been delayed by 1-2 weeks.
Coupled with improving downstream polyester demand, PTA inventories at bonded futures warehouses have also ebbed lower.
Near-term PTA market tightness is being reflected in the forward curve, which is heavily backwardated over the next few months as PX and PTA flows normalise from May onwards.
By Friday the May’23 contract was at a RMB 70/tonne discount to the current month’s contract; Sept’23 RMB increasing markedly to a 588/tonne discount.

MEG futures drifted marginally higher with crude recovering some ground early Friday, before crude gave up much of its weekly gains later in on Friday’s session.
Again, start-ups and upcoming plant turnarounds are lending near-term price support, with several plants in China, South Korea, and Taiwan shutting units for maintenance.
However, having moved lower in recent weeks, East China main port inventories rebounded 4.6% last week to around 1.06Mt.
Beyond the current maintenance period, further recovery in downstream demand is needed to eat into the current oversupply.
Near-turn supply constraints created by turnarounds mean MEG futures are heavily backwardated over the next month, before rising slowly through the rest of the year.
On Friday, the May’23 contract was at a RMB 268/tonne discount to the current month’s contract.

Chinese PET resin export prices moved higher in the early part of last week with producers attempting to follow raw materials, with prices averaging USD 1000/tonne last Friday, up USD 30/tonne on the previous week.
The weekly average PET resin physical differential to feedstock costs fell slightly by around USD 3/tonne to average USD 69/tonne for the week. By Friday, the daily spread had decreased to USD 65/tonne.
The PET resin raw material forward curve increased steeply in backwardation last week. At Friday’s close, the May’23 contract trading at a USD 20/tonne discount to the current month’s contract, whilst Sept’23 was running at a USD 67/tonne discount.

Latest trade data for January and February 2023 shows that total PET resin exports for this period had increased 27.3% to over 786.4k tonnes versus the previous year.
Existing backlog and good intake levels in Q1 meant PET resin producers are increasingly sold-out for April, although shipment is still widely availability for May.
Tighter availability, coupled with higher raw material prices, enabled producers to follow raw materials higher last week.
However, many export markets are reporting high stock levels, meaning buyers with adequate coverage may be resistant to higher offers, instead moving to the side-lines.
Whilst buyers needing immediate supply are likely to turn to small ‘hand-to-mouth’ orders.
With the forward curve moving into greater backwardation, much will now be determined by the schedule and ramp-up of new capacity additions over the coming months.

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