Chinese PET firmed up on surging upstream costs

Major Chinese producers this week lifted offers for both local and export cargoes on the back of surging upstream costs. In fact, export offers from the country indicated some $40-50/ton hike compared to last week, reaching $950-960/ton FOB China, LC AS term.

A trader offered the cargoes to Southeast Asia informed, “Our customers are shock with such large hike and initial respond is very poor. However, our principal suppliers need to recoup the production costs, hence holding firm on the cargoes.”

Meanwhile, local offers in China breached above the CNY8000/ton threshold to reach CNY8100/ton ($1005/ton without VAT) today. A bottled beverage manufacturer commented, “We plan to just take wait and see stance since our business is amid off-peak season. We think suppliers are caught between high production costs and weak demand, yet we do expect the pressure to ease toward the end of the month.”

Looking at the upstream market, monoethylene glycol (MEG) has been following the firming trend since early October, however, increased significantly during the past week. Compared to early December, MEG based on CFR China term jumped nearly 12% due to persistent limited supply and surprised healthy demand from polyester sector. This condition is expected to remain in place for the rest of December before several Chinese plants could stabilise production after resume operation from maintenance shutdown, market sources said. Till then, it is very likely that PET producers might hold firm on their cargoes to protect profit margins before the year-end closing.