NPE ’18: US PET market faces challenges in peak season

ORLANDO (ICIS)–Shifting market dynamics in the last year have tightened the US polyethylene terephthalate (PET) market and created a number of challenges, delegates said on the sidelines of this year’s National Plastics Exposition (NPE), and conditions are “changing by the day”.

Key events since the last NPE in 2015 have pushed supply insecurity to the forefront of the market once characterised by ample supply (see timeline below).

US resin buyers face higher-priced imports and domestic material at the start of this year’s peak consumption season amid reduced import options and snug domestic supply.

Earlier this month, the US issued its preliminary duties on resin from Brazil, Indonesia, Pakistan, Korea and Taiwan. The widely expected move slowed import volumes beginning around December 2017.

Adding to the import issue, domestic capacity is reduced this year after Italy-based Mossi & Ghisolfi (M&G) shuttered its West Virginia resin plant last October and subsequently filed for bankruptcy protection and put that plant and its unfinished vertically integrated Corpus Christi, Texas project up for sale.

Resin concerns prompted earlier-than-usual peak season preparation as buyers who have historically been accustomed to ample supply beefed up their inventories.

Import prices are steadily rising this year, heard up by 6 cents/lb ($132/tonne) this year from some buyers, and in some cases selling at a premium to domestic resin.

Domestic producers are sold out, leaving no room for non-contract buyers. Separately announced 3 cent/lb increases emerged from US producers in late April, citing rising feedstock and freight costs.

“The unforgivable sin is running out of resin and stopping production,” a source said, adding that many buyers understand that paying a slight premium is necessary under these conditions. “Others are playing with fire.”

A buyer source said the market certain feels snug, especially ahead of the start-up of the ex-M&G plant. Rail issues have compounded the supply concerns, as rail cars that at one time took only a day to get can now take up to four days, the source said.

“This is the toughest the market has felt in 20 years,” the buyer source said.

Far Eastern New Century (FENC), the Taiwanese PET producer new to the US market with the West Virginia purchase, will likely begin operations after the second quarter. However, the 360,000 tonne/year plant will absorb only some of the demand.

The market does not expect the Corpus Christi project, which was purchased by CC Polymers, to be finished and started up until late 2019 or early 2020. Capacities for the vertically integrated PET/purified terephthalic acid (PTA) plant are 1.1m tonnes/year and 1.3m tonnes year, respectively.

While supply has been the primary market driver, feedstocks will likely be pressured upward by firming crude values. Oil prices have topped $70/bbl and should put some cost pressure on raw materials.

Major producers of US PET are Indorama, DAK and Nan Ya.

Sponsored by the Plastics Industry Association (PLASTICS), NPE2018: The Plastics Show takes place on 7-11 May in Orlando, Florida.

Focus article by Amanda Hay