PET Raw Material Futures Outlook: PET Resin Export Prices See Support as Price Drop Stimulates Demand

Insight Focus

  • Increased polyester operating rates provide PTA and MEG markets with near-term support.
  • Recent fall in PET prices stimulate fresh demand as bottle-grade PET resin sales improve.
  • Raw material forward curve continues to show downward trend through Q3’23.

PTA Futures and Forward Curve

  • Oil prices notched up their first weekly gain in a month on renewed optimism that the US will avoid default, signs emerge of strong fuel demand in the US ahead of driving season.
  • PTA Futures showed modest price gains with the main Sept’23 contract up by just under 1% on the week.
  • Polyester operating rates were once again the rise, as domestic polyester and bottle-grade PET resin sales improve, beverage companies prepare for summer demand.
  • However, PX supply is expected to further increase with several plants restarts, potentially lessening support for PTA prices.
  • Whilst there is ample PTA supply, the PX-PTA spread may also see some near-term support from those producers still to carry out maintenance turnarounds mid/late May.
  • However, from mid-June onwards we expect PX and PTA supply to expand, although improving downstream demand may help limit potential inventory accumulation.
  • The forward curve remains backwardated, near-term strength continues to ease with the curve reducing in steepness; by Friday, the Sept’23 contract was trading at a RMB 152/tonne discount to the current month.


MEG Futures and Forward Curve

  • MEG Futures for the main forward month of Sept’23 fell by 1.8% last week. Despite continuing poor margins, further supply cuts and increased downstream demand may begin to improve overall fundamentals.
  • Although Chinese domestic MEG production has faced significant cuts already, more reductions are expected in May and June, as several other producers move into maintenance.
  • The degree to which these have/or have not already been factored into the market though is debatable.
  • And although port inventories increased slightly last week by 1,7% last week to around 968k tonnes, expectations are for port inventories to also continue to decrease.
  • Prices may keep firm in the near-term. However, rising supply in the coming months may constrain further price gains.
  • By Friday, the current month spread to the Sept’23 contract had narrowed, with Sept’23 holding a RMB 100/tonne premium.


PET Resin Export – Raw Material Spread and Forward Curve

  • Chinese PET export prices continue to decline last week, with prices averaging USD 930/tonne on Friday, down a further USD 20/tonne on the previous week.
  • The weekly average PET resin physical differential to feedstock costs increased by USD 17/tonne to average USD 68/tonne for the week. By Friday, the daily spread was at a USD 71/tonne, the highest daily level since mid-March this year.
  • The current PET resin raw material forward curve has begun to flatten out considerably, with the expiration on May contracts. Over the next 12-months, whilst still backwardated prices look set to stabilise into Q4’23.
  • At Friday’s close, Sept’23 raw material costs were trading with only a USD 15/tonne discount to Jun’23.


Concluding Thoughts

  • After months of low margins an upward trend in the physical differential between future feedstock costs and resin prices may be emerging.
  • Whilst a seasonal breakout in the spread is yet to be confirmed, the recent fall in PET resin prices has stimulated domestic restocking as beverage companies prepare for peak season.
  • Improving domestic demand and a reallocation of export volume to the home market is likely to provide support to PET resin export margins as supply is diverted.
  • Buyers have also shown increased interest in placing export orders, particularly within European, Middle Eastern, and East African markets.
  • Stabilisation in the raw material forward curve, coupled with a modest improvement in export margins, may see PET resin export prices firm into June.
  • However, imminent new capacity from Sanfame and others, will continue to weigh on sentiment.

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Gareth Lamb

Gareth joined Czarnikow in 2021 and is Czarnikow’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 Czarnikow, 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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