By Malini Hariharan
All is not well in the Asian polyester chain. Demand has slowed down exerting a steady downward pressure on prices.
Purified terephthalic acid (PTA) spot prices have dropped by $100/tonne in the last week to $1,290-1,300/tonne CFR China Main Port and the outlook for the coming months is bearish, reports ICIS news.
The price slide shocked many market players but the indications were there – futures prices on the Zhengzhou Commodity Exchange have fallen 14% since early March.
Monoethylene glycol (MEG) spot prices have also slipped, dropping by $30/tonne last week to around $1100/tonne CFR China. Earlier in the month, major producers decided to lower their contract nominations for May because of weak market fundamentals.
And paraxylene (PX) too has come under pressure with spot cargoes trading at a discount last week for the first time in six months.
The shift in markets follows changes in cotton, which had supported much of the prices gains seen in polyester and its raw materials since last year.
Futures prices for cotton on the Intercontinental Exchange have been falling since early April after hitting an all-time high of $2.179/lb on 7 March.
The fall is partly because production is expected to rise as record high prices last year have given farmers the right incentive to raise acreage.
This is likely to happen in the US and India but Chinese acreage may not grow as farmers have turned to other crops that offer better returns.
China would then have to import larger volumes of cotton which could reignite a rally in cotton prices and support a recovery in pricing of fibre intermediates.