By Malini Hariharan

The polyester chain is feeling the strain of poor Chinese demand.

Weak export demand and Chinese government policy are also impacting this sector, as is the case in polyolefins.

A further factor behind the problems in the polyester chain is the fall in cotton prices, as fellow blogger Paul Hodges points out.

Monoethylene glycol (MEG) spot prices have plunged this week to a 15-month low to $1,015-1,020/tonne cfr China Main Port on panic selling.

Traders have been rushing to offload cargoes to make room for new arrivals, reports Becky Zhang on ICIS news. Chinese tanks are running full with total MEG stocks in the country estimated at nearly 800,000 tonnes.

The volumes would probably have been digested easily in a good month. But demand has fallen in recent weeks, as Chinese polyester producers have cut production on weak margins.

The average sales-to-output ratio for polyester producers has been at 50-70% since early February, as the textile industry is seeing fewer domestic and export orders.

Falling spot MEG prices have had an impact on contract numbers with MEGlobal lowering its April nomination by $20/tonne to $1,200/tonne.

The scene in purified terephthalic acid (PTA) markets is equally serious. Producers are facing a persistent squeeze on margins.

Spot paraxylene (PX) prices were at $1,650-1,660/tonne CFR Taiwan and/or China Main Port on 12 March, while PTA prices were at $1,180-1,195/tonne CFR China Main Port, ICIS data showed.

Assuming a conversion cost of $120/tonne, non-integrated PTA producers were incurring a loss of around $41/tonne on a spot basis.

This has forced some producers such as South Korea’s Samsung Petrochemical to bring forward a turnaround of its 700,000 tonnes/year plant by two weeks to 24 March.

Market players in the polyester chain are now anxiously waiting to see if demand will pick up by end-March or early April, when the textile manufacturing season usually starts.

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