Water woes, idled feedstocks pressure Americas PET after winter storm

HOUSTON (ICIS)–The winter storm and ensuing power outages and water issues that paralysed most US Gulf coast chemical production likely will affect Americas polyethylene terephthalate (PET) well into March.

About 85% of US monoethylene glycol (MEG) capacity and 70% of paraxylene (PX) capacity were idled by frigid temperatures, limiting downstream purified terephthalic acid (PTA) and PET production.

PTA and MEG are the two feedstocks to make PET for use in packaging – which is more prevalent in the Americas – as well as polyester fibre for textiles, production of which is centred in Asia.

Nearly half the population of Texas experienced disrupted water supply as a result of power failures at water treatment plants.

In addition, the frigid temperatures burst plumbing pipes at many residences and businesses.

BOTTLED WATER SURGE
As of Friday, the Texas Commission on Environmental Quality (TCEQ) said 14.9m Texans – half the state’s population – were on a boil-water notice.

Many Texas municipalities have established distribution sites for bottled water while residents are under a water-boil advisory or have no running water at all.

Texas Governor Greg Abbott said on Sunday afternoon that the state had received 3.4m bottles of water.

Although advisories are being lifted, nearly 9m people still were subject to boil-water orders as of Monday morning.

PET REBOUND
The PET market, however, likely will take weeks rather than days to recover.

Feedstock MEG and PX units could restart this week, but even before the storm, the supply chain was already tight.

Exceptionally strong PET demand in the US has been outpacing domestic production and import volumes since the pandemic started in early 2020.

Domestic PET production could face even more challenges than in September 2020, when hurricanes along the US Gulf coast limited supply of feedstock MEG to US and Latin American PET producers.

During the 2020 hurricane season, Europe exported excess volumes of PET to the US to compensate for reduced production as a result of curtailed feedstock supply.

This time Europe exports are unlikely, as that region is tight on supply as well, due to upstream shortages, and logistical and technical issues.

Curtailed production of these feedstocks will also affect PET production in Latin America, which relies on US imports for domestic production of resin.

Mexico’s output was already reduced in February due to the unplanned maintenance of a line at a PET plant.

Any reduced supply of MEG or PX to Mexico’s buyers will result in reduced PET availability to supply US buyers.

In 2020, Mexico was the biggest supplier of US PET imports, representing 30% of total imported volumes, according to the ICIS Supply and Demand Database.

The US receives 60% of total Mexico PET exports.

In addition, demand into polyester fibre is ramping back up as Asian countries return from the Lunar New Year holiday and prepare for the peak textile production season in March and April.

Americas PET production was already struggling to meet persistently strong demand amid the coronavirus pandemic and changing consumer behaviours.

Asian imports have filled in the gaps, as Americas PET production is limited by upstream PTA capacity.

MEG is an intermediate in the production of polyester fibres and polyethylene terephthalate (PET) bottle resins, and as an automotive antifreeze.

Glycol producers in the US include Dow, Eastman Chemical, Formosa, Indorama Ventures, Lotte Chemical, LyondellBasell, MEGlobal, Sasol and Shell Chemical.

Focus article by Antoinette Smith

Additional reporting by Luly Stephens

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