Global PET markets firm up on higher feedstock costs

Spot PTA, PX and MEG prices have been on a rally both in Asia and Europe since the beginning of August which drove downstream PET markets higher in China, Turkey and Italy, as per ChemOrbis. Producers issued increases citing their rising production costs and need to recover their margins although firmer price targets were met with resistance from the buyers’ side. In upstream news, energy prices fluctuated up and down since the beginning of this month while they still indicated increases on a weekly basis. On the NYMEX, crude oil futures for September deliveries gained US$1.86/barrel on the week, while they represented a larger increase of more than US$3/barrel with respect to one month ago. Spot feedstock costs followed suit, with PTA and MEG prices on CFR China basis and PX costs on FOB South Korea basis rising between US$25-35/ton week over week. The latest figures soared US$55/ton for PX and PTA while they surged US$125/ton for MEG when compared to early July levels. Plus, August PX contracts settled up US$30/ton from July contracts at US$1440/ton CFR Asia. In China, export PET offers maintained their upward momentum on the strength of firmer costs over the past week. Export prices for Chinese origins gained US$20/ton on FOB China basis, cash, while offers for South Korean PET increased US$10-20/ton FOB Busan, South Korea, cash. A Chinese producer lifted their export prices by US$20/ton with a producer source saying that they didn’t see satisfactory demand after their hikes. "We are mulling over issuing further hikes considering our negative margins," he noted. Another Chinese producer lifted their offers by $10-20/ton on FOB Shanghai basis. "Buyers may need some time to adapt to our most recent hikes and we believe that they will eventually accept our new offers," a producer source commented. In Turkey, PET prices firmed up further with the bullish trend being felt more towards the end of past week, driven by soaring MEG and PX feedstock costs. Import Chinese and South Korean ranges rose US$30/ton on both ends last week, while the range for South Korean materials are up another US$20/ton so far this week. Origins with 3% customs duty gained US$10-30/ton on CIF/CFR Turkey, subject to 7.5% additional tariff, cash basis last week while today prices surfaced US$10/ton above last week’s high end. A trader issued additional hikes of US$10-30/ton this week after lifting their Chinese PET prices by US$30-40/ton last week. “Our new offers are not found competitive due to their 6.5% customs duty,” he admitted. “Although most players combined their holidays, many converters still operate their plants as it is the middle of the high season. One of our customers asked for an immediate delivery. The nearest shipment date for imports is by end August and then buyers will need to purchase their September cargoes. Hence, we expect some pick-up in demand for imports following the holiday.” One converter said they are not going to have a long holiday and will continue to run their plant as the market is in the high season. Another buyer shared the view saying, “We are currently running our plants and are not planning to have a long holiday. Import PET prices rose when compared to last week amidst the contribution of higher upstream prices and euro/USD parity which rose to 1.33 from 1.28. We expect this trend to continue after the holidays,” he stated. Meanwhile, he added that sellers prefer to sell to Europe where they see better demand due to some closures in the region like La Seda’s plant, while players in Turkey mostly turn to Far Eastern sources to meet their needs. “The rising trend is playing a role in the slowness ahead of the holiday. However, considerably higher MEG and PX prices may be more dominating than poor demand,” a trader who was offered $30-50/ton increases said last week. In nearby Italy, the PET market opened August on a firm note in line with higher feedstock costs, according to ChemOrbis. A South European producer revealed new PET offers €20-30/ton above July. A producer source noted, “Demand was good in July and we expect it to remain healthy in August owing to good weather conditions. We elected to raise our prices due to higher PX and MEG costs. In addition, Asian PX contracts settled up for August.” Although buyers are reluctant to pay increases and are asking for rollovers, the producer is planning to maintain their firm stance in a need to recover their margins after conceding to discounts in July.