PET Market Expansion, Raw Material Prices Rise

Market Overview

Recent reports indicate that the positive policy expectations from China’s macroeconomic meetings have largely been priced into the market. While government measures to support domestic demand, boost consumption, and invest in infrastructure have helped bolster confidence, their full impact will take time to materialize. Meanwhile, global economic uncertainty, especially the slowdown in major Western economies, continues to weigh on external demand.

On the cost side, oil prices have remained within a long-standing range. Despite Brent crude rebounding from the $70 per barrel support level, oil prices have not seen strong upward momentum. Oversupply concerns and a slowing global economy continue to limit price increases, even as speculation rises that the U.S. Federal Reserve may cut interest rates again.

Factors Driving Polyester Price and Sales Turnaround

Despite a lack of significant growth in seasonal end-user demand, polyester production and sales have expanded due to delayed demand transmission within the supply chain, speculative factors, and inventory pressure at factories. New polyester capacity coming online in December has led to higher operating rates, supporting demand for polyester raw materials like PTA and MEG. Limited maintenance before the Lunar New Year also provides additional support for raw material demand.

PX and PTA Market Fundamentals

1.PX Market

While China's PX operating rates have increased, the price differential between PX and MX continues to narrow. This has reduced the incentive to source MX for PX production, easing supply pressure. With the end of long-term contract negotiations, spot market pressures have lessened, and selling sentiment has improved. PX prices are expected to stabilize and rise gradually after the Lunar New Year, supported by demand recovery and capacity adjustments.

2.PTA Market

Early maintenance at PTA plants has helped slow the accumulation of excess inventory, tightening supply. PTA operating rates have reached their highest levels of the year, while processing margins have compressed. The early shutdown of major PTA plants, such as Yisheng Ningbo (2 million tons) and Jiaxing Petrochemical (1.5 million tons), has lowered PTA operating rates from 85.6% to 82.1%, tightening supply further. The restart times for these plants remain uncertain due to compressed processing fees, contributing to fluctuating PTA price expectations.

3.Chinese Export Demand and Inventory Changes

Seasonal increases in export orders and a key raw material replenishment window have boosted downstream demand. At the same time, as polyester production and sales have expanded, inventories at filament and staple fiber factories have dropped significantly. While end-user demand remains subdued, the flexibility of polyester factories to adjust production and inventory levels has allowed for quick market responses, improving supply chain efficiency.

Key Factors Behind Polyester Price and Sales Reversal

Raw Material Support: Strong demand for PTA and MEG, driven by new capacity, has supported raw material prices and impacted polyester pricing.

Seasonal Demand: Growth in export orders and accelerated inventory depletion have provided a boost, particularly in textiles and packaging sectors.

Capacity Expansion & Flexibility: New production capacities and the ability of factories to adjust operations have helped maintain balance in supply and demand.

Policy Support & Market Sentiment: Government policies have supported market sentiment, contributing to improved demand forecasts and price trends.

Outlook

While end-user demand has not surged, supportive supply and demand factors, including new capacity, growing export orders, and stable raw material prices, are providing a foundation for the polyester industry. In the short term, raw material demand will remain strong due to high operating rates and limited maintenance. As seasonal demand shifts around the Lunar New Year, the polyester market is expected to remain resilient, with potential for further price increases.

Reference

Oil Price(Dec 13, 2024)|Oil Prices Rise Alongside Geopolitical Risk