Price and market trends: China PET glut hits US, Mexico

08 May 2014 17:28 Source:ICIS Chemical Business

There is a growing oversupply of PET in China and material is making its way to the US West Coast and Mexico

China is sending more virgin polyethylene terephthalate (PET) resin to the US west coast and Mexico, suppressing PET prices in both countries, a US recycling source said on 1 May.

A participant in the recycled polyethylene terephthalate (R-PET) market has noticed large amounts of cheaper PET resin from China entering the west coast, as well as Mexico.

That sentiment tracks recent trends of virgin PET in Mexico and the US. Virgin PET in the US remains unsettled. In Mexico, ICIS-assessed prices for virgin bottle-grade delivery declined $30/tonne in April.

Speakers at the second ICIS PET conference in Amsterdam recently echoed the same thoughts, arguing that globally PET is oversupplied and that much of the excess capacity is being driven by China.

The US R-PET source said that the PET oversupply is proof that China’s economy is slowing down faster than many first thought.

“I don’t mean to be a chicken little here, but the party is China is coming to an end,” the source said. “The business of China being an unstoppable juggernaut is over.”

In addition, the source rejected long-held sentiment in the recycling market that other Asian countries would jump into the business once China slowed down.

“I’ve been hearing for years that everyone is moving to Malaysia and Vietnam, but only two companies from those countries have come to me to buy material,” the source said.

“And they only wanted very small amounts. That tells me that the recycling infrastructure in those two countries is not there yet.”

Another West Coast R-PET market player who has years of experience buying virgin material said that imports from China have always affected the US, but not to this extent.

“Imported virgin PET resin tends to hit the west coast first, so I’ve seen this for years,” the source said. “What’s happened is that the deltas recently have just gotten wider. They’re definitely sending more material over.”

US PET yet to settle
US PET monthly negotiated prices for April remain in limbo because feedstock contracts did not settle, prompting a potential multi-month settlement in mid-May, market sources said.

The upstream paraxylene (PX) contract did not settle for April, which means there is no April purified terephthalic acid (PTA) contract price, a PET market participant said.

Market sources have said that they expect PET April prices to trend flat to down.

Meanwhile, March monthly negotiated prices were assessed down at 81.5-85.0 cents/lb stretch blow moulding (SBM) delivered (DEL) from 82.0-86.0 cents/lb SBM DEL in February.

Market sources said that PET spot prices rolled over in April from March.

Supply has been recently tight, while demand strong, market sources said. An ongoing force majeure on purified isophthalic acid (PIA) has tightened PET supply since mid-February, market sources said. PIA is an isomer of PTA, a major feedstock.

Sources are not certain when the force majeure will be lifted, but estimate full operational restart sometime in the summer.

By Andrew Guy Jr and Feliza Mirasol