Price and market trends: US PET market tight amid peak season

Upward price pressure has emerged in May in the US polyethylene terephthalate (PET) market amid snug supply and the start of the peak consumption season.

Buyers are digesting a round of price increase initiatives. Producers have announced separate 3 cent/lb ($66/tonne) increases in late April, citing rising feedstock and freight costs.

Tight resin supply continues as the market’s primary price driver – a situation sparked in autumn 2017 by the bankruptcy and asset sale of former major US PET producer Mossi & Ghisolfi (M&G) and by the US antidumping probe into resin imports from Brazil, Taiwan, Indonesia, Pakistan and South Korea (see timeline graphic).

Preparation for peak season began earlier than usual this year, as buyers who have historically been accustomed to an amply supplied market acted on resin shortage concerns.

Sources were advised that the second quarter could be particularly tight and to stock up to keep plants running.

IMPORTS SCARCE

Buyers without strong domestic contracts in place face a tough situation, as imports are said to be selling at a premium to domestic resin in some cases. Anyone short on supply as May begins may find it too late to take those proactive measures.

Domestic resin producers are sold out, and imports have slowed since the launch of the US antidumping investigation, creating a snug environment just as the warm-weather peak season kicks into gear.

International Trade Commission (ITC) data showed January PET imports down by 5.9% month on month and February imports down by 24%.

“My crystal ball says in the next 90 days, it’s going to get very tight, if not shortages,” one source said. “Supply is the name of the game.”

A buyer source said the market certain feels snug, especially ahead of the start-up of the ex-M&G plant in Apple Grove, West Virginia. New owner Far Eastern New Century (FENC), a Taiwanese PET producer new to the US market, will likely begin operations after the second quarter. However, the 360,000 tonne/year plant will absorb only some of the demand.

LOGISTICS BOTTLENECKS

Moreover, logistics issues with rail and trucking continue to plague the market with shipment delays and higher costs. The source said there’s “no end in sight” on logistics troubles, and rail has not yet shouldered some of the backlog caused by trucking.

While supply is the main concern, raw material costs may be pressured upward in May as crude values firm and demand picks up as the weather gets warmer.

Looking ahead, market participants expect firm conditions to persist throughout 2018 and into 2019. It is widely expected that the US will impose duties on resin imports, keeping shipments to the country reduced.

Meanwhile, CC Polymers, the joint venture that purchased M&G’s giant but unfinished integrated PET/purified terephthalic acid (PTA) plant has not yet released a timeline for start-up. The market generally expects production to begin in late 2019, which should keep supply snug through 2019 as well.

Major producers of US PET are Indorama, DAK and Nan Ya.

Meanwhile, Latin America polyethylene terephthalate (PET) prices are still rising on the strength of high demand for bottled drinks in the northern hemisphere.

PET prices in Asia have an impact on Latin America’s PET prices by means of formulae that market players use in pricing. High demand in Europe and rising prices in Asia continue to be the drivers behind the latest uptrend.

PET markets in Latin America are still feeling the impact of the Mossi & Ghisolfi (M&G) plant closures and auctions linked to its Chapter 11 bankruptcy protection. These have curtailed supply in the entire American continent. In addition to the US, M&G had plants in Mexico and in Brazil that put out an important volume of PET in those markets.

Activity in the US Gulf is also an important factor in the region, but more so for Mexico, because of the North America Free Trade Agreement (NAFTA). Prices have risen in the region under the influence of Asian price direction, but also because of the perceived scarcity of PET and the unresolved production issues.

Additional reporting by George Martin