OUTLOOK '20: Latin American PET remains slow on long global supply

Author: Luly Stephens


HOUSTON (ICIS)--The polyethylene terephthalate (PET) markets in Latin America are likely to remain slow on the back of long supply, falling prices and low buying interest.

Latin American resin trading has been dragged down by an environment of tension that emerged during the third and fourth quarters of 2019. Economic and political difficulties in several countries will contribute to a cautious outlook for the first quarter of 2020.

Political events have severely impacted on local economies. This has led to demonstrations and civil unrest, hampering any hope of a significant improvement in the near future - despite the warmer weather.

The sluggishness in the PET resin market has also persisted in North America and Asia, contributing to a downward price trend across the globe. This has been more obvious in Asia - and China in particular - resulting in consistently softer offshore offers in Latin America.

Latin American resin prices have traditionally tracked the price trend in Asia, but with a slight delay. However, in countries where import volumes are significant or there is no domestic production, Asia price trends are felt immediately as import prices set the market price as product enters these countries.

As demand for Asian PET softened further with the onset of the seasonal lull there, offers from Asia proliferated in non-producing countries in Central and South America.

There is, however, little offshore product entering PET-producing countries such as Mexico, Argentina and Brazil. This allows for more stable pricing in those countries - despite the modest demand levels seen.

Market fundamentals in Mercosur are expected to remain sluggish as weaker Asian prices set the tone for resin values. In addition, the depressed Argentinian economy continues to impact on business in neighbouring countries.

Although the market in Brazil has been slower than expected, sales volumes have been improving.

Market conditions in Mexico are sluggish, impacted by the soft demand conditions seen in the US.

In Colombia and other countries along the Pacific coast of South America, mixed pricing is at the forefront, highlighting the diverse offshore offers received.

Since the third quarter of 2018, international PET prices have come under downward pressure due to the economic slowdown stemming from the US-China trade war. This has resulted in abundant supply and weak demand.

Despite optimistic gross domestic product (GDP) growth projections of 3% and more for some Latin American countries, resin participants remain cautious because of the precarious economic and political state of several countries in the region.

In its World Economic Outlook in October 2019, the International Monetary Fund (IMF) published its gross domestic product (GDP) growth projections by country.

The soft market conditions seen across the Americas during the last quarter of 2019 are likely to linger in the first quarter of 2020.

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, Mossi & Ghisolfi and Indorama are PET producers in the Americas.

Focus article by Luly Stephens