FocusAsian PET offers down 3%, to dip further

16 January 2008 05:47  [Source: ICIS news]

By Hong Chou Hui

SINGAPORE (ICIS news)--Asian polyethylene terephthalate (PET) offers have softened by 3% on poor demand and thin trades for the first half of January, producers and traders said on Wednesday.

Values are expected to dip further before recovering in March after the end of the Chinese New Year holidays, they added.

PET bottle chip offers softened by $40/tonne (€26.80) to $1,350-1,380/tonne free-on-board (FOB) Korea for the week to 11 January from $1,350-1,420/tonne last week, based on global chemical markets intelligence service ICIS pricing.

“We’ve more or less finished producing the aerated drinks and fruit juices that are a must-have among consumers during Lunar New Year,” an executive from Chinese drinks maker, Wahaha, said in Mandarin.

“We will be scaling down operations from next week because our workers need to return home for the festive period,” he added.

After consecutive price increases from November through January on tight supply, MEG majors Shell, Sabic and MEGlobal quoted lower MEG contract nominations for February, further stiffening downstream end-users’ reluctance to accept offers from PET sellers.

Producers and traders begged to differ as feedstock purified terephthalic acid (PTA) prices have firmed in recent weeks.

“We’re already offering bulk discounts for buyers but every time we negotiate, they always return with a lower bid. The offers that we’re quoting now barely allow us to maintain our margins because PTA prices have gone up despite MEG prices coming down,” said a source from Korean PET bottle chips maker, KP Chemical.

He added that PTA costs comprised of more than half of PET’s manufacturing outlay.

“We may have to shut down one PET line soon if things don’t improve, In the meantime, our PET offers could be reduced order to secure deals but if negotiations reach a level which threatens our margins, we would rather walk away,” the source said.

KP Chemical’s four PET lines at its Ulsan facility are currently running at a reduced capacity of 70%.

Similarly, downstream polyester fibres and yarns sector which utilises PET fibre grade chips, and witnessed its prices buckling under due to thin trades recently.

Market watchers were upbeat that demand generated by the Beijing Olympics in August, coupled with the removal of European textile quotas on Chinese polyester exports, would propel global demand in 2008.

“The traditional lull period between the Lunar New Year and the China Import and Export Fair in May could be shortened this year due to the Olympics. Hopefully, our order books will start to fill up by March,” said a source from Chinese polyester producer, Xiamen Xianglu Chemical Fibre, in Mandarin.

The China Import and Export Fair which takes place twice a year, is a barometer of export orders from China on a half yearly basis.

PET bottle chips are used to manufacture bottles for consumer goods such as drinking water and cooking oil while PET fibre chips are utilised for making polyester fibres and yarns.

Major PET producers in Asia include Far Eastern Textile, SK Chemicals and Tongkook.

($1 = €0.67)

By: Hong Chou Hui
+65 6780 4359

< previous article(ICIS Chemical Business podcast November 2, 2009)

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