PET markets in Asia likely to stabilize

Last week in Asia, upstream production costs recorded weekly increases, as per ChemOrbis. Supply issues, coupled with firmer futures prices played a role in the recent upstream price uptrend. Players reported that production problems in South Korea prompted firmer PTA prices. Early last week, South Korean Taekwang Industrial declared a force majeure on PTA supplies from their 1 mln tpa plant located in Ulsan. Prior to this shutdown, persistently weak downstream demand had pushed PTA producers operating in Taiwan, China and South Korea to lower their operating rates. Spot PTA costs in Asia recorded US$40/ton increases, MEG gained US$45-50/ton and PX moved up by US$25/ton during this past week. Despite the recent increases, spot production costs are still below their early October levels. As compared to levels reported at the beginning of October, PTA prices still indicate US$95/ton decreases while MEG and PX prices represent US$40/ton and US$135/ton drops, respectively. This recent recovery on production costs caused some sellers to question whether PET prices have hit the bottom and if prices would see some stabilization. Despite these increases, global buying interest for PET remains sluggish amidst the low season. A Chinese trader remarked, “PTA prices firmed up given the production issues in South Korea, but local Chinese PTA supplies can still be deemed as comfortable since the production rates are above 70% in the country.” Another trader claimed that a Chinese producer informed them about their intention to lift their PET prices by around US$20/ton over the near term. “However, we are not sure if such attempts can be materialized since our customers’ expectations continue to centre on softer prices over the near term amidst thin demand,” he added. A source at a Chinese producer commented that they offered PET at unchanged levels during last week while noting that PET prices have hit their lowest levels of the past few years. “Although oil prices are still weak, PET prices might maintain their levels if crude prices remain around $75-80/bbl. Nevertheless, we are still not very optimistic about the future trend of the PET market,” he further added. According to ChemOrbis, a source at a different Chinese producer commented, “Local PET demand is weak but exports are not that bad since we at least managed to conclude deals with our regular customers. The large drops in PET prices, which occurred in a short period of time, had pushed buyers even further to the sidelines.” According to him, prices might start stabilizing over the near term although he admits that the overall PET demand remains sluggish. “Polyester demand should have been better in winter due to the textile sector but this year the season appears to be delayed slightly. Most likely, the market will continue to be dominated by the uncertain economic situation and the unstable upstream costs,” he further added.