POLYESTER BOTTLE GRADE RESIN - MAY/JUNE 2011

Finally Indorama has partially restarted PET production at Decatur, and should resume to optimum production once PTA supply issues from BP’s PTA plants is fully restored, which as of date appears to be in startup phase.  In the meantime, the supply chain has continuously become tighter.  Due to depleted stocks, some converters have had supply disruptions as well.  Selenis has successfully started its PET facility in Canada and also M&G has recovered from its earlier force majeure at Apple Grove.  All plants that are not dependent on BP’s PTA appear to be operating normally.  However, as June & July are peak season times, it is evident that price decline, due to softening PTA, may face resistance due to downstream pull and a  tight supply chain imposed through MEG, upstream, route and downstream via converters.  A peculiar situation has set in, whereby, PTA in the international market is softening, which would make imports more competitive, however, many downstream converters have been able to easily sustain and in the case of Nestle, been able to increase price by 10%.  So the interplay of these multiple factors, PTA shortage, MEG global price increase due to global shortages, softening of overseas PET prices in light of weakness in PTA leading to the threat of import, and the high season in NA, are adding to the complexity of this market.  Best analysis for future pricing would be price reduction at a decelerated rate, to limit imports.

Downstream demand in East and West Europe remains quite strong as converters are operational at +90% levels.  A temporary price bubble that had been developed as the downstream textile polyester sector in Far East remained extremely bullish prior to the contractionary monitory holds imparted by the Chinese government that allowed downstream prices in Europe also to reach unprecedented levels.  But now the pressure situation has let off some steam and subsequently offshore prices have started to appear more economical.   Some producers were hoping that price should further maintain the downward trend in the European market.  However, with the strengthening of MEG, in light of the global shortage, and PET from Far Eastern manufactures heading for the NA market, support has been given to PET pricing.  AlcoNaptha PTA plant now is fully operational which is helping in the maintenance of a very balanced supply chain. 

In Japan there is a healthy downstream demand, particularly in the mineral water sector.  Firstly the downstream pull is high due to seasonal demand.  Further, nuclear radiation which was an aftermath of the recent earthquake, there is an apprehension by the consumers for safe consumption of mineral water from the local producers and therefore, this requirement is being fed by imports.  This is exemplified by the fact that Seven Eleven convenience store has started to import bottled mineral water from Taiwan, Korea and USA.  A total import of 72 million water bottles is being planned for the summer.  Korean prices currently have risen slightly to over $1600 fob levels and exports are a challenge in the European market specifically with the appreciation of the Won.  This resultant upward price movement is following raw material changes, with PTA softening and MEG strengthening.  Further, exports to Japan for bottled mineral water remain strong.  A similar situation is being witnessed in Taiwan where operating rates are near the 90% mark.  The Chinese market is also operating at a similar rate.  Although regional prices have decreased somewhat, due to monitory holds in China, however, there has been a steady buildup of off shore demand, particularly in the North American, South American, Japan as well as East Europe.  It should noted that Japan, Russia and Ukraine account for 40% of Chinese export destinations.  Similarly local downstream demand has been high as restocking at converter