By John Richardson
A SENSE of panic has gripped the fibre intermediates chain as a result of falling crude oil prices, an industry observer told the blog.
“Nobody knows where the bottom of the market will be, which, to me, feels a great deal like the crisis in late 2008,” he said,
“Prices are in virtual free fall. The only good news is that once they stabilise, they will recover as demand growth remains robust. But this, of course, depends on crude settling down.”
He estimates that polyester demand in China will still grow by 6 percent this year, considerably down on last year’s 8-10 percent growth, but nevertheless a decent performance when you consider that polyethylene (PE) is in negative growth territory.
The styrenics industry is an awful mess, also, as a result of the collapse in exports of finished products to the West.
“The good news for polyester is that it continues to gain ground over other synthetic fibres and cotton,” he continued.
But while the long term outlook might, arguably, still be good, Becky Zhang, Asia ICIS pricing purified terephthalic acid (PTA) editor, wrote in her report for the week ending 1 June: “Cash is not a major issue with polyester producers in China, as the government has been relaxing its monetary policy to encourage liquidity and consumption since the beginning of the second quarter of this year, traders said.
“The main problem is the lack of market confidence, players said. The market is immersed in bad news including massive capacity expansions, the worsening situation in Europe, and a slowdown of economic growth in China and India.”
This is the same shift in mood that we detected in the polyolefins industry two weeks ago. China’s plastic converters have become reluctant to borrow money because of anxiety over the global economy, over domestic growth and over local politics.
And, as the industry observer said, prices are declining very rapidly: Paraxylene was down by $69/tonne - a 17 month low – and PTA fell by $37-40/tonne, representing a 19 month low, according to ICIS pricing.