Downstream expectations of production cost increases may affect Europe PTA, DMT

Source: ICIS News


LONDON (ICIS)--Production costs for purified terephthalic acid (PTA) and dimethyl terephthalate (DMT) are under pressure to increase if the dominant Asian market is to be adhered to, but not as much as the markets were originally anticipating.

- PX prices end downturn

- PET bottling season imminent

- Economic mood affects PTA and DMT

Paraxylene (PX) prices ended a four-month downturn in February, and look set to continue to rise. European values tend to be influenced by Asian dynamics, as can be seen in the following graph.

Downstream polyethylene terephthalate (PET) sources are still counting on an increase, but the impact of an uncertain Asian sector is causing hesitation in Europe.

The seasonal uptick in the PET bottling season is imminent and March is usually when the buying frenzy begins.

While contractual offtake is decent, buyers are reluctant when it comes to spot purchases. This is partly due to import commitments and the general macroeconomic mood.

How product flows react to the much-publicised downstream buyers’ attraction to first-quarter imports of PET is as yet unclear. Indeed, pre-booked PET imports looked like a bad deal earlier in the year, and most recently offers from Asia have failed to entice Europe-based purchases.

PTA offtake depends largely on the major PET sector, however, PTA purchases are mostly formulaic, based on monthly PX price moves, as are those for DMT.

Global economic concerns are creating a cautious short-term outlook and downstream demand in dominant China has disappointed. As a result, anticipated PX and therefore PTA and DMT price hikes going forward have been dampened to more moderate expectations this week.

That said, an uptick in Asia on 1 March may signal a return to positivity, but it is impossible to say at this stage.

The following graph shows the difference between DMT and its cheaper counterpart PTA.

DMT contracts are agreed using a calculation with monthly PX and include methanol on a quarterly basis.

First-quarter methanol prices dropped by €78/tonne amid plunging energy values, after a series of quarterly increases, thereby influencing the extent of the decrease in January DMT pricing.

PTA is largely used in the production of polyester fibre, which in turn is used to make fabrics for apparel and home furnishings such as bed sheets, bedspreads, curtains and draperies.

DMT is used to make polyester fibres for textiles, resins for drink bottles and films for audio-visual equipment and packaging.

Picture source: Alex Segre/REX/Shutterstock

Focus article by Caroline Murray