OUTLOOK ’18: Asia PET seen firm in Q1 2018 on supply tightness

28 December 2017 03:15 Source:ICIS News

SINGAPORE (ICIS)--Asia polyethylene terephthalate (PET) market in the first quarter of 2018 is likely to continue to see the supply crunch overhang from the previous year, thus supporting already firm prices.

In 2017, the global PET market went through a worldwide supply upheaval.

Multiple plants were impacted in regions that included Mexico, North America, and Brazil, among others. Western buyers circumvented their supply crunch by buying Asian material.

Because of this reason, while PET demand normally cools down with the winter weather, the heavily hobbled supply had sustained demand.

The supply break seen in 2017 will likely not be fully repaired by the first quarter of 2018, which may keep demand aloft and prices up.

Crude oil has seen healthy gains toward end of 2017, and these gains have bled down the supply stream into purified terephthalic acid (PTA) and monoethylene glycol (MEG) prices, all ingredients for steeling PET prices against softening.

In Q4 2017 the American government began an anti-dumping duty (ADD) investigation filed against PET material from Brazil, Pakistan, Indonesia, Taiwan, and South Korea.

Most market players believe this ADD will be imposed, adding to America’s current list of countries on which ADD had been applied, namely China and India.

If the ADD passes, it may make a mark on Taiwanese and South Korean material.

Without America, Taiwanese and South Korean producers will have to re-strategise their 2018 target markets as they were selling rather heavily to America during the 2017 supply crunch.

As of Q4 2017, several significant producers said they were looking for new buying regions.

Some Taiwanese producers were known to be testing the Vietnamese market with lower prices to establish a preliminary seller-buyer relationship.

China and India were heard to be making deeper inroads into Africa, notably West Africa.

It’s understood that these two market players are the main producers selling from Asia into the African region at the moment.

Producers from other Asian regions such as Taiwan agree Africa has a great deal of potential and may be a significant customer when it is more developed.

The South Koreans were also selling a significant amount to Europe in 2017.

However, JBF’s facility in Geel, Belgium, restarted during Q4 2017, and this will ease the strangled supply Europe experienced in 2017.

South Korea will likely have to find new sources when European buyers and North American buyers are unable to buy its material.

“We are already researching on alternative markets we can sell to,” a South Korean producer said.

The Chinese lost its Japanese market share when the ADD on Chinese material was passed in 2017.

Japan is expected to buy from various markets in 2018, but the main contenders for the Japanese market are currently Taiwan and South Korea, since geographically they also have the fast shipping time advantage.

Overall, market prices may soften for Taiwan and South Korea when the US passes the ADD, unless they have alterative markets.

South Korea normally sells to Europe but depending on the euro’s strength and how the European supply holds up in 2018 European market share for South Korea may change.

India and China are expected to continue worldwide export for bottle-grade PET, while continuing to grow their footprints in the newer markets, such as Africa and South America.

It is unsure what will happen with Mossi & Ghisolfi (M&G’s) subsidiaries in north and south America since it filed for bankruptcy in Q4 2017.

The plant shutdowns in Altamira, Mexico and Apple Grove, West Virginia, have impacted global supply.

It is understood that the company is working to restart its Mexican plant, at least.

If it restarts then this might impact the Asian bottle-grade PET demand again.

Southeast Asian bottle-grade PET has enjoyed brisk sales, with prices going on an uptrend during Q4 2017.

Since the potential ADD on Taiwanese and South Korean material was announced, certain Southeast Asian producers have been selling to North American customers.

Producers said sales to the region were healthy. A southeast Asian producer described inventory as “critically low.”

Fibre-grade and film-grade material has been comparatively much less liquid than bottle-grade.

Prices have not fluctuated with as much volatility for both materials compared to bottle-grade material.

Producers say that customers are not willing to pay their workable selling indications, hence causing standstills in negotiations processes.

The market is not likely to become more liquid in 2018.

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Outlook article by Ruth Loh