US PET market suffers effects of global slowdown

Author: Luly Stephens

2019/09/11

HOUSTON (ICIS)— The escalation of the US-China trade war has affected small and large businesses globally, resulting in a severe slowdown in the polyethylene terephthalate (PET) market.

Source: imageBROKER/REX/Shutterstock

The prolonged friction between the two countries has impacted buyers' confidence, especially now after more than a year of talks and retaliation. Some analysts expect the economy to worsen in the coming months and do not rule out the possibility of a recession.

Against this backdrop, resin producers are experiencing thinner profits as prices for PET pellets have been on a general downward trend since October 2018. US PET prices had gains of 3 cents/lb in February and of 1 cent/lb in March, but weak demand during the peak summer season prevented any further price hikes. Conversely, prices have declined every month from April to September.

The Asian PET market appears to be facing similar or worse difficulties as offers of Asian resin to Latin American buyers have been steadily dropping since last September except for a short-lived bullish sentiment of two weeks in late May.

Chinese suppliers have been prompted to reduce prices significantly due to high inventories, amid slow spot inquiries as major brands are believed to have already purchased enough product for the remainder of the year.

Extremely slow market conditions continue to exert pressure on pricing as sales volumes decrease and the summer season is almost over in the Northern Hemisphere. Supply continues to build and feedstock costs remain soft, asserting the fact that the 2019 peak demand season will not reach previously anticipated levels.

With most US large buyers believed to have enough stocks through the fourth quarter, and plenty of availability from offshore suppliers at low prices, domestic resin prices moved down in order to compete.

September business so far has shown price erosion of 2-3 cents/lb, depending on the accounts. Further erosion is not ruled out. Most spot transactions for domestic product are now in a 50-55 cents/lb delivered range.

Spot prices for imported resin are heard at around 46-48 cents/lb CFR US West Coast, while spot offers of imported material on the East Coast hover around 2 cents/lb higher.

Imports of PET resin from Mexico have declined sharply due to the slowdown, affecting Mexico’s sales significantly, leading most market participants to expect a price decrease in September PET prices in Mexico as well.

Influenced by the weak market conditions and price erosion in virgin resin numbers, prices of US post-consumer bottles of PET decreased about 2 cents/lb to 13 cents/lb FOB US West Coast and to 11 cents/lb FOB US East Coast in September. Reclaimers also cited poor demand from the recycling segment, with high inventories drivers for the decrease.

Demand for PET bales has been trending down in line with the global economic slowdown despite efforts by brand owners to increase the percentage use of recycled PET in their bottles to protect the environment from plastic waste contamination.

Most post-consumer PET bottles trade in the domestic market, with lower export volumes after the Chinese plastic ban implemented in January 2018.

PET largely goes into bottles and containers for beverages and foods, as well as other forms of packaging through blow molding, thermoforming or extrusion into film. It can also be used in fibres for clothing or compounded with glass fibre for the production of engineering plastics.

PET resins can be broadly classified into bottle, fibre or film grade, named according to the downstream applications. Bottle grade resin is the most commonly traded form of PET resin and it is used in bottle and container packaging through blow molding and thermoforming. Fibre grade resin goes into making polyester fibre, while film grade resin is used in electrical and flexible packaging applications.

PET can be compounded with glass fibre for the production of engineering plastics.

DAK Americas, Indorama, Nan Ya Plastics Corporation and Far Eastern New Century (FENC) are PET producers in the US.

US PET reclaimers include CarbonLITE Industries, Global PET, Inc., Peninsula Plastics Recycling, Florida Recycling, Marglen Industries, Mohawk Industries, Inc., Signode Plastic Recycling Alliance, Clean Tech, Inc., PQ Recycling, ULTREPET, Clear Path Recycling, Evergreen Plastics, Reterra.

Image above shows PET bottles