Chemical profile: US PET

Source: ECN

2018/10/04

Uses

Polyethylene terephthalate (PET) has a crystalline structure and good chemical resistance to mineral oils, acids and solvents but not to bases. It has good electrical resistance and low moisture absorption. It resists combustion and is self-extinguishing.

US PETPET exists both as an amorphous (transparent) and a semi-crystalline (opaque and white) thermoplastic, and can be made into either a resin or a film. The semi-crystalline PET has good strength, stiffness and hardness while the amorphous PET has better ductility.

PET can be made into a resin, fibre or film. The largest outlet is synthetic fibres, followed by bottle resin. PET film is used in electrical applications and packaging.

Supply/demand

US resin supply tightened significantly in autumn 2017 on two key events – the bankruptcy of major US resin producer Mossi & Ghisolfi (M&G) and the launch of a US antidumping probe into imports from five high-volume foreign resin sources.

M&G ran into serious financial trouble in building an integrated PET/purified terephthalic acid (PTA) project in Corpus Christi, Texas that would have been one of the world’s largest integrated PET/PTA facilities at 1.1m tonnes/year and 1.3m tonnes/year, respectively.

Having run out of funding options for both the project and its day-to-day operations at existing plants by August 2017, M&G was forced to halt construction, shutter its West Virginia plant, reduce rates in Mexico and Brazil and file for bankruptcy protection in the US over the next few months. This took 360,000 tonnes/year of resin production off line in the US alone.

M&G subsequently put its US assets up for sale, with the West Virginia plant purchased by Far Eastern New Century (FENC) and the giant Corpus Christi project bought by a joint venture of Alpek, Indorama and FENC. The Corpus Christi sale has yet to receive government approval.

Meanwhile, the antidumping probe shifted trade flows as imports from Brazil, Indonesia, South Korea and Taiwan fell steeply from 2017 to 2018. Pakistan is the only country involved in the investigation from which imports grew.

The best positioned buyers in the US in 2018 had strong domestic contracts in place. US producers have been sold out all year and running at strong rates in the absence of M&G. Import buyers have struggled to find new alternative sources of foreign resin.

Resin buyers began positioning themselves for peak bottle drink season, which typically aligns with warmer weather in the summer, as early as January and February with the expectation that supply would be snug through 2018. Conditions began to tighten in March. The top priority for buyers in 2018 is not shutting down bottle production lines due to lack of supply.

Despite the antidumping probe, which yielded preliminary duties in April with final determinations coming in September, import volumes soared by 44% through July compared with the same period in 2017, according to the International Trade Commission (ITC). New sources emerged, such as Malaysia and Oman.

Domestic supply constraints eased somewhat in July with the restart of the former M&G plant in West Virginia, now owned by new US producer Far Eastern New Century (FENC).

Prices

Tight supply emerged as the primary price driver of the US PET market in 2018, shifting away from raw materials price movements.

Import buyers sought out alternative sources, such as in Malaysia and Oman, but grappled with rising prices from those countries, often at a premium to domestic resin, especially early in the year.

US PETDomestic resin prices rose over 20 cents/lb ($441/tonne) compared to 2016 and 2017.

Producers could not capitalise on margin expansion with longer-term contracts that were negotiated in late 2017. Tight conditions are expected to weigh on negotiations for 2019 as additional capacity is not expected until 2020.

Technology

In the manufacture of PET resins, PTA and monoethylene glycol (MEG) are reacted to make a basic ester, which is polymerised in a melt phase, polycondensation finishing reactor.

Dimethyl terephthalate (DMT) is an alternative feedstock to PTA but the PTA route is preferred. The molten polymer is extruded, cut into chips and cooled. The chips pass to a solid state polycondensation unit to form the PET resin.

Outlook

The tight conditions that drove price increases in 2018 are expected to persist through 2019. Resin prices should remain elevated, but with further fluctuations driven largely by feedstock changes unless a major plant outage occurs.