OUTLOOK ’18: Supply crunch could keep US PET market firm amid antidumping, bankruptcy cases

HOUSTON (ICIS)–Resin supply is expected to be the primary driver of the US polyethylene terephthalate (PET) market in 2018, and the general sentiment is that pricing pressure will persist in the new year after supply uncertainty drove resin prices higher in the latter part of 2017.

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A US antidumping investigation and the outcome of the asset sales process of resin producer Mossi & Ghisolfi (M&G), which filed for bankruptcy protection and shut in production across the Americas during autumn 2017, could keep PET pricing firm. Both situations have combined to create a resin supply pinch that has US  buyers scrambling to find alternate sources.

“Demand is strong, and that’s the problem,” a market source said. “Everyone is looking to build before peak season, and it won’t be normal for a while … material is not available.”

The US antidumping investigation — which targets resin imports from Brazil, Indonesia, South Korea, Pakistan and Taiwan — will wrap up in May 2018. Globally, market players generally expect the US to impose antidumping duties (ADD) on resin from those countries.

The US case builds on other antidumping cases around the world that have shifted global trade flows and created more insular PET markets.

More clarity in the M&G situation should come sooner, with that company’s US asset sales process expected to wrap up in early March. Up for sale are M&G’s 360,000 tonne/year PET resin plant in Apple Grove, West Virginia, and its integrated PET/purified terephthalic acid (PTA) complex under construction in Corpus Christi, Texas.

The latter plant would be the world’s largest resin facility if it is ever completed with PET capacity of 1.1m tonne/year and PTA capacity of 1.3m tonne/year. The Corpus complex was to be completed in 2015, but repeated construction delays saddled the company with $1.7bn in debt. M&G was eventually forced to halt production at multiple plants in the US and Latin America this autumn, hurting global supply.

This supply insecurity looks to be a larger driver of the US PET market than upstream feedstock costs going into 2018. However, there is some potential for raw materials to firm as well if crude pricing remains strong. Demand will be strong early in 2018 as buyers build their inventories ahead of the peak bottle drink season. Players in Asia have already been reporting strong US buying interest in late 2017 during a period of the year that typically sees lower demand.

The US market generally expects PET pricing for 2018 to average higher than 2017 levels due to tight market conditions carrying into the new year.

If buyers secure material via alternate routes and the buyer of M&G’s assets starts up the plants, pressure could begin to ease and the market could start a path back to normalcy.

The spike in virgin resin has created more opportunity for recyclers. Demand is strong for R-PET, with especially robust interest in the southeastern US fiber industry.

Some pricing softness remains in the R-PET market, however, as uncertainty remains as to what will happen when China’s ban on scrap plastics goes into effect at the end of 2017. Export demand has softened significantly for West Coast bottle bales.

Major producers of US virgin PET resin are Indorama, DAK, Nan Ya and Mossi & Ghisolfi.