PET prices continue to escalate in Asia

PET prices continue with their relentless increases in Asia as upstream costs continue to push prices higher, as per Chemorbis. Despite complaints from buyers regarding higher offer levels, overall trading activity picked up to some degree in the region due to the higher costs. This week, spot PX prices rose by US$180/ton FOB Korea basis, spot PTA increased by US$60/ton and spot MEG increased by US$20/ton CFR China basis. As compared with prices seen towards the end of 2010, increases of US$220/ton for PX, US$110/ton for PTA and US$70/ton for MEG have been seen. This week, South Korean PET offers gained US$80/ton at both ends of the overall offer range on FOB Busan, cash basis. Low stock levels at warehouses of most South Korean producers coupled with the higher upstream costs influenced this increase decision. Meanwhile, sources report that producers have already managed to conclude some deals at their new higher offer levels. Offers from domestic producers in China gained CNY100-200/ton over the week. Most domestic producers held onto their previous week’s offer levels at the beginning of the week, although towards the end of the week, they started to lift their prices on the back of the rising feedstock costs to recoup their margins. These sellers currently adopt a firm stance regarding their offer levels, as they believe that the increases on feedstock costs will continue for a while longer, highlighting the fact that oil prices remain above the US$90/bbl threshold. On the other hand, distributors are willing to offer discounts to liquidate their stocks ahead of the impending Chinese New Year holiday while buyers are building some stocks, anticipating further increases after the holiday when considering the higher feedstock costs. These hikes are also taking their toll on the end product markets as several beverage manufacturers are mulling over announcing price hikes on their end product prices to cover their higher production costs. In China’s export market, overall offer ranges escalated by US$40-50/ton over a week’s time while players comment that it got very difficult to find offers at the lower end of the range towards the end of last week. Pointing to their higher production costs, producers are unwilling to offer discounts since their offer levels are still below the theoretical costs based on the current spot PTA and MEG costs. The fact that most producers feel free from stock pressure is another factor supporting their firm stance. Now, the PET market is expected to remain firm over the short term considering the bullish upstream prices and the producers’ comfortable stock levels. However, it is unlikely large increases will be seen in the upcoming weeks as buyers will need some time to adjust themselves to the new higher offer levels and due to the upcoming Chinese New Year holiday which will cause some slowdown in demand as converters prepare to shutdown.