The PET resin demand is strengthening as the summer season approaches. Coupled with this sentiment it should further be noted that the supply chain is quite tight in North America . Low inventories are being experienced throughout the supply chain for a multitude of reasons. Firstly the winter volumes were uncharacteristically high, which allowed better off-take. Further the perception that demand would start waning as winter approached, which impeded the need to stock high, was proven wrong. Further in light of high pricing, downstream users the purchase decision has remained delayed. The above reasons have resulted in a very tight inventory position and a need to restock at the converter level. An increase in demand seems forthcoming as resin volumes have remained good in the CSD as well as the water sector. Still due to heightened demand, PET producers are operating at high capacities and report to be sold out. Further the imports have been declining and this can be assessed in fall of imports of 25% during the first quarter of 2011 when compared to the corresponding period of last year. Therefore to compensate for this lost supply, there would be a shift of supply from Export to Local requirement for NA producers to alleviate the supply tightness. It was anticipated that PET prices would increase by another 4-5 cents/lb during April, but with PX rolling over from it higher limit settlement, and then subsequent decline in feedstock, the revised settlement in all likelihood would be anywhere between 0.5-1.5 cents increase.
In the South American market there has been a falloff in demand as the low season has begun. The market has experienced demand as high as 8-12% over the last year. However, the local supply situation remains tight given the second force Majeure of M&G that happened on April 20th. This closure which has been brought about by power issues is expected to remain till the middle of May. This has tightened supply not only in Brazil but also Argentina Argentina ; but now this is over and the slowdown in demand is happening at a faster rate than Brazil
With the resumption of PTA availability in Europe , PET resin plants have started operating at 100% capacity as backlog of orders is cleared. Purchases have been held off by converters, with the expectation that price corrections in the sector are underway. The odd thing to be noted over here is that inventories are thin in the supply chain, and a resumption of purchases should commence as the high season approaches. Converters hope of PET price correction is a bit far-fetched, but reasonable price adjustments of raw material have been witnessed. This has a direct consequence on PET pricing. At the pricing end, what’s being witnessed is that PTA producers, given the recent spate of force majeure, want to enjoy good margins over PX as demand is expected to remain healthy with the onset of PET season. However with PX losing ground, majority of PET producers who formula price on PX, will result in downward pressure on PET; this ultimately would have an impact on PTA pricing as well. By end April the delivered prices of PET (polyester resin bottle grade) had gone down to €1515-1545/ton, and by May a downward trend has ensured further decrease in the low €1400’s.
It was hoped that a lot of domestic demand would be served after the start of production of AlcoNaptha at Kaliningrad Ukraine Far East , but margins have remained reasonable. A lot of PET is still being exported out of Korea and Taiwan to Europe , to furnish unfulfilled demand. Initially there was a notion that in light of decreasing prices, a high crude oil price which had started impacting PX would restrict a price fall in PET, and somewhat ensure trading within a narrow band. However, with the drop of crude oil below $100/barrel, this notion has changed. Currently PET prices are trying to stabilize from the free fall being experienced during start May when prices have reached $+1600 fob levels. Operating rates remain as high as 90%. The Chinese market has been affected by the tight monitory policy as well as financing limitations due to exposure limits in international currencies have increased cost of financing. This has ultimately affected the margins. Further, in order to increase operating rates, the Chinese producers have been pricing aggressively which is another reason for some loss in margins for them and further downward pressure on price. It is generally felt that shortages of PTA and MEG in the supply chain will help in stabilizing the downstream pricing. Average operating rates have remained reasonably healthy in the region of mid 80%. Far Eastern Shanghai
