11 January 2013 11:32 [Source: ICB]
Price increases in Asia likely to be reflected in US market as players in Latin America watch and wait for 2013 direction
The US polyethylene terephthalate (PET) market in 2013 is likely to follow the lead of Asia, where feedstock prices have been rising, market sources said.
PET demand in Latin America was slower than expected throughout 2012, even during the peak season for bottled drinks
Demand has been soft in December, and sources are expecting prices to roll over or decline. No price announcements were heard for December, but at least two producers were said to have announced price hikes for January.
PET had modest gains in October and November, with increases implemented that raised prices by 4 cents/lb and 2 cents/lb, respectively.
US PET GROWTH
Sources forecast growth in US PET at 1-2% in 2013, which they say will improve PET economics. Imports are expected to continue, and there is expectation that levels will be the same in 2013 as in 2012, although a slight increase may be seen.
Capacity is said to be running at around 75%, according to market sources. December is typically the slow season, but volumes will pick up as the market moves into the New Year and into the up season.
Market participants are sceptical about Indorama Ventures' November 2012 announcement that it is expanding PET capacity in the US with a new 540,000 tonnes/year plant. The expansion is expected to be completed in the fourth quarter of 2015 and is expected to take Indorama's total North American PET capacity up to 2.1m tonnes/year.
Some market participants question whether the company will get the necessary financing to move forward with the project, and see the move as a direct challenge to Mossi & Ghisolfi's September announcement that it is moving ahead with its 1m tonne/year PET plant and 1.2m tonne/year purified terephthalic acid (PTA) plant at Corpus Christi, Texas.
Sources said they are monitoring both expansions.
Meanwhile, upstream PET feedstock costs are showing strength. Paraxylene (PX) and monoethylene glycol (MEG) prices in the Asian spot markets rose in early December, driven, in part, by a stronger downstream purified terephthalic acid (PTA) market.
Further, US PX is said to be in short supply for 2013, in worse condition than 2012, a market source said. The price of PX is expected to rise soon, which should push up PET prices by the end of the first quarter.
In Latin America, PET participants have been monitoring firming resin and feedstock prices in Asian and US markets during November and December to project direction for the first quarter, according to input from regional sources.
Participants note that Latin American markets usually lag Asian developments by several weeks, and direction for the start of 2013 remains elusive, despite the recent firming trend in Asia.
Although Latin America is not a monolith where all countries react to global market forces in exactly the same way or at the same time, there is a commonality in the region's response to dynamics in other regions, particularly in Asia.
Despite the focus on Asia to gauge regional trends in the Americas, local factors also have a role in Latin American markets.
Mexican, Central American and Caribbean PET markets usually track the US market closely. Brazil and Argentina, each a PET producer, are closely aligned with each other and show some independence from other external markets, although they also follow developments in Asia. Countries on the Pacific coast of South America are influenced more immediately by Asian PET markets because they rely on resin imports to fulfil requirements.
Demand varies depending on hemisphere, with South America in the midst of its peak bottle-drinking season, and cooler weather driving down consumption in North America, including in Mexico.
The Latin American market usually experiences an uptick before the year-end holidays.
PET demand in Latin America has been slower than expected throughout 2012 even for the soft-drink peak seasons, which vary with the hot weather in the southern or northern hemispheres.
Although no one cause was named as the key driver for soft demand, sources in Latin America pointed to several possibilities, such as reduced purchasing power, lower soft drink consumption on health concerns, re-use of PET bottles, weak global economies, slowing growth rates in China, greater use of recycled PET and a soft polyester fibre business.
Additional reporting by Ron Coifman in Houston
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