Tumbling feedstock costs pull down Asian PET prices

In Asia, PET prices recorded decreases for the second consecutive week in October, following the one-week National Day holiday in China in the first week of October, as per ChemOrbis. Chinese PET producers had returned to the market with lower PET prices in line with the softer export offers. This week, tumbling feedstock costs have caused further decreases in the PET market. PET feedstock costs mid-month were mostly in line with the early October levels. However, last week, upstream markets recorded noticeable drops when compared to the previous week. Consequently, spot PX prices shed US$150/ton on FOB Korea basis while spot PTA and MEG prices lost US$140/ton and US$110/ton, respectively, on a week over week basis on CFR China basis. PTA prices have nearly reached year low levels while the thin demand and weaker market sentiment were the main reasons behind this severe softening. Meanwhile, PX prices, reaching the lowest levels seen since over three months, have been suffering from the same bearish market conditions, causing large decreases in prices. Tightening credit lending, which is a result of the Chinese government’s attempts at taming inflation, is another reason triggering the current cloudy outlook in the upstream markets. Looking at China, local PET producers’ prices lost CNY300-500/ton (US$47-78/ton) since the previous week as sellers lament slowing business activities. “Buyers generally act more cautiously towards making fresh purchases as they watch the steep decreases in feedstock costs,” commented the producers. Nowadays, most Chinese converters are reducing operating rates, pointing to weaker end-product businesses in line with the fading high season. In China’s export market, producers’ offer levels are US$20-60/ton softer on FOB China, cash basis although they continue to struggle to conclude deals as the South Korean producers’ export offers, which are US$50-70/ton softer on week over week basis, are currently posing as a more competitive option for buyers. Reportedly, South Korean producers are offering aggressively in the market as they want to relieve their mounting stock pressure, prompted by the vanishing demand from their European customers. Nowadays, the PET market is expected to maintain its soft trend as the lower upstream costs are yet to be reflected to the PET prices. Based on the spot MEG and PTA prices, a theoretical PET production cost, without producers’ margins, comes to US$90-155/ton lower levels when compared to the current offer levels in the market on FOB China basis.
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