PET Raw Material Futures Outlook: PTA Futures Drop Further, Export Prices Steady

Insight Focus

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.

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