Higher costs continue pushing import PET market in Asia higher

The Asian PX market has been climbing higher since mid of July this year thanks to the resilient support from the tightened supply and improved demand from the polyester sector. Data from CommoPlast suggests a hike of nearly $370/ton in a time span of about two months. Despite a brief reduction late last week, PX costs based on CFR Taiwan term get back on the firming track almost immediately. 

Healthy demand from the downstream PTA and polyester market is one of the main factors steering market higher. In fact, PTA price based on CFR China is currently at its highest levels since beginning of 2018, too. The positive profit margins for PTA have encouraged several plants that were undergoing indefinite shutdown to come back online.

According to market reports, China’s Sinopec Yangzi restarted its No. 3 PTA plant this earlier month after being shut since November 2017. Meanwhile, Jialong Petrochemical might restart its 600,000 ton/year PTA unit by end of September, after being shut since mid-June 2018. This would general an additional demand of approximately 69,000 tons of PX per month.

Supply for PX in Asia, however, might remain tight in quarter 4 inline with several major shutdowns in China, South Korea and Japan.

Strong upstream costs has pushed the Southeast Asian PET market to another record high for this year as producers seek to recoup the higher production costs.

On an average, import PET bottle to the region surged above the $1400/ton threshold and there is no surprise that demand cannot catch up. Major markets in the region including Philippines and Vietnam are in mid of the monsoon season, which dampened demand to some extent.

“We have stepped back on offer for Chinese materials by $20/ton compared to earlier this week to $1385/ton CIF Vietnam and yet, sales results are not satisfactory. Customers are very aggressive in placing much lower bid,” an international trader informed.

In the meantime, Indonesian buyers are mostly asking for the price level $1350/ton for Chinese origin cargoes, claiming that the depreciation of the local currency make it more expensive to import now. “We could not meet the bid. Even at the price level $1380/ton CIF Indonesia, we are not having materials. Supply is not high as many PET bottle makers are facing squeezed profit margins,” a trader offering Chinese cargoes to Indonesia at $1420-1430/ton CIF, said.

It is a tug-of-war in the PET market, which market participants at both side of the supply chain refused to make any major decision at the moment. One thing more certain is that high production costs would continue to limit supplier’s capability to concede to any large discount.