Asian PET Resin Prices Stable After U.S. Election

PTA Futures and Forward Curve Analysis

Last week, PTA futures prices increased by around 1%, primarily driven by higher upstream costs and supported by a slight improvement in market fundamentals. Brent crude oil prices rose by 1%, closing above $73 per barrel, partly due to market volatility around the U.S. election. Although oil prices slightly retreated after an initial surge, the market remains highly sensitive to fluctuations in oil prices.

The PTA futures forward curve continues to show a mild contango structure, with the January 2025 contract priced at a premium of 46 yuan/ton over the current month’s contract and the May 2025 contract at a premium of 140 yuan/ton. The forward curve structure indicates a relatively optimistic outlook for PTA supply and demand, with risks of tightening supply remaining low in the coming months and annual contracts.

Impact of Oil Prices on PET Raw Materials  

Oil prices are a critical factor in PET resin production, especially for PTA, which is heavily influenced by oil price fluctuations. The recent recovery in Brent crude prices has had a positive impact on the PTA and PET markets' fundamentals. However, with oil prices still in a volatile state, raw material prices could remain unstable in the short term. During the winter months, oil price fluctuations could intensify due to weather conditions, geopolitical tensions, or other external factors (such as developments in the Middle East or climate change), potentially further affecting the petrochemical raw material market.

PX Fundamentals Analysis

The fundamentals for PX (Paraxylene) remain weak, with the PX-N spread continuing to narrow, which shrank by $10 per ton last week, indicating persistent supply pressure in the market. At the same time, the PTA-PX CFR (Cost and Freight) spread has slightly improved, rising to around $80 per ton. This suggests that while PX production and supply are under pressure, the production costs for PTA have remained relatively stable and have shown slight improvement.

MEG Futures and Forward Curve Analysis

MEG (Monoethylene Glycol) futures prices have continued to rebound strongly, ending the decline seen at the end of October, with the main contracts rising by 1-2% last week. As the market gradually recovers, MEG shows strong signs of resurgence. However, despite the price rebound, inventories at major ports in East China have increased by about 6.8%, reaching 612,000 tons, indicating some pressure on the market due to inventory buildup, especially as demand remains stable.

The MEG futures forward curve remains steady, with a slight contango structure. A mild upward trend is expected over the next 12 months. The January 2025 contract is priced at a premium of 65 yuan/ton over the current month’s contract, and the May 2025 contract holds a premium of 158 yuan/ton. This pricing structure suggests a relatively optimistic market outlook for MEG supply, with prices expected to remain stable and show slight increases in the coming year.

The backwardation structure of the futures curve could reflect expectations of supply risks in the future, despite the current stability in demand. The price dynamics could still be influenced by fluctuations in downstream product markets and raw material costs.

China PET Resin Exports – Raw Material Price Differentials and Forward Curve

The export price of PET resin in China remained largely unchanged last week, indicating stability in the market. Although prices are holding steady in the short term, the market still faces some risk of volatility due to raw material cost fluctuations and changes in global demand.

The weekly price differential for PET resin relative to raw material futures costs has remained stable, standing at -$19 per ton. This suggests that while PET resin market prices have fluctuated, the price gap compared to raw material costs has not shown significant improvement. By last Friday, the daily price differential stood at -$20 per ton, indicating that PET resin prices have not seen a marked increase.

This also reflects the pressures from raw material markets, particularly with fluctuations in oil prices and other related raw material prices. Participants in the market need to closely monitor upstream material price trends to respond to potential cost fluctuations.

PET Resin Futures Prices

PET resin futures prices rose by over 0.5% last week. This indicates that, despite the short-term fluctuations, futures market prices are recovering, although they remain subject to uncertainty due to forex volatility.

The weekly raw material futures premium has remained stable at approximately $22 per ton, with the daily premium standing at $21 per ton by Friday. This narrow spread indicates that PET resin futures are experiencing a relatively stable market, with cautious optimism regarding future supply and demand conditions.

The PET resin futures forward curve continues to exhibit a mild contango structure, with the May 2025 contract priced at a premium of $4 per ton over the March 2025 contract, and the September 2025 contract at a premium of $19 per ton. This suggests that market participants expect prices to gradually rise through mid-2025.

Market Outlook and China's Economic Performance

As the largest producer and consumer of PET resin globally, China's economic performance directly impacts the supply and demand dynamics of the global market. Recent data from China shows a recovery trend, particularly in the manufacturing and consumer goods sectors, which is driving increased demand for PET resin. With the recovery of the domestic consumption market and the resumption of manufacturing capacity, PET resin demand is expected to continue to grow.

Additionally, as the global economy gradually recovers and demand from markets such as Europe and the U.S. picks up, the PET resin market is expected to remain stable. Although short-term fluctuations in prices may be influenced by supply chain disruptions, crude oil price changes, and macroeconomic factors, the medium- to long-term outlook for the PET resin market remains positive, with gradual price increases anticipated.

As domestic and international demand recovers, PET resin prices are expected to remain stable through the end of the year, with moderate price increases likely. Market participants can adjust their production and procurement strategies based on these forecasts to maximize returns in a fluctuating market environment.

Conclusion

With the fluctuations in the prices of key raw materials like PTA and MEG, the PET resin market is seeing shifts in the supply chain. Despite fluctuations in raw material costs, the overall market remains stable, particularly in China and other major production regions in Asia. Producers generally report that the stability of the raw material supply chain supports the continued growth of the PET resin market.

Moreover, with the U.S. election results clarified, the market is optimistic about the future direction of U.S. government policies. While oil prices have shown volatility, most believe that regardless of the election outcome, global economic and raw material demand will remain robust. As countries continue to push for green and sustainable development policies, this trend is expected to bring new opportunities to the PET resin industry.

Source: CZ Insights, November 12, 2024 | Asian PET Resin Prices Mute in Immediate Wake of US Election

For further information on PET resin market trends, please refer to the following resources and links:

- ICIS (www.icis.com)

- Platts (www.spglobal.com/platts)

- Reuters (www.reuters.com)

- Bloomberg (www.bloomberg.com)