US PET players staying afloat in rocky peak-season waters

HOUSTON (ICIS)–The US is weathering a stormy polyethylene terephthalate (PET) peak-demand season while being pummeled by tight supply, firm resin prices and volatile raw materials markets.

An Oman cyclone that cut off key imports in June is the latest obstacle in a string of events starting in 2017 (see timeline below) that significantly tightened a historically amply supplied market, starting with the financial fall of producer Mossi & Ghisolfi (M&G).

Buyers face domestic resin prices are over 20 cents/lb ($441/tonne) higher than at this time in 2016 and 2017. Imports have also climbed in price, often selling at a premium to domestic.

US resin producers contend with their own challenges, having been sold out for months and running at operating rates over 90% without maintenance, a market source said.

“It’s going to be catastrophic if there’s a problem with a line,” the source said.

Product has been difficult to secure for those without strong contracts as not much material is available for spot deals.

Producers have not been able to take advantage of the spot market, the source said, and some contracts are underwater based on raw materials.

“No one wants to be on the sidelines in a market like this,” the source said.

Snug domestic supply heightened the need for imports, which initially took a hit when the US launched an antidumping probe last autumn but picked up in March with growth coming from countries not involved in the investigation due to tightness in domestic supply.

Oman became a key new import source and accounted for 7,425 tonnes in April, the latest month for which trade data are available.

Source: International Trade Commission (ITC)

The investigation is ongoing, but preliminary duties were imposed in late April.

Supply relief is expected soon when Far Eastern New Century (FENC) restarts the former M&G West Virginia plant that was shuttered in October, taking 360,000 tonnes/year off the market. A company source said restart is expected in the last week of June.

Volatility in raw materials markets exacerbated an already tight market.

Market sources said BP put feedstock purified terephthalic acid (PTA) on sales allocation in late May, stemming from an acetic acid outage. Further upstream, a BP paraxylene (PX) production unit went down in early April, market sources said, tightening US PX supply and sending spot prices sharply higher.

BP did not confirm the outage nor the restart of the PX unit, nor did it confirm that PTA was on sales allocation.

The impact on PET was limited, however. A market source said the PTA allocation was manageable with no effect on contract business. However, little resin was available for spot deals.

Another market source said it was hard to believe that the upstream volatility did not result in more waves in the PET market, but was relieved it did not.

“We can’t handle any more events,” the source said.

Focus article by Amanda Hay