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PET bottle fails to salve pandemic wounds; challenges mount as autumn begins

by Merve Sezgün -
  • 24/09/2020 (04:09)
PET bottle prices in Asia, the Middle East and North Africa were already on a prolonged downward trajectory when the COVID-19 outbreak started to rattle the markets in around February. With the pandemic coming into the picture, things got worse and prices plunged to historically low levels.

Export prices from China hit a more than a decade low by the end of March, while they have failed to recover from lows since then. This is because demand continued to disappoint sellers even after the lockdowns were lifted and the summer began.

Prices still hovering around more than a decade low

Data from ChemOrbis Price Index reveal that PET bottle prices on FOB China and CIF SEA/Turkey/Egypt basis have been mostly hovering around their lowest levels in more than a decade.

The weekly average of FOB China prices slipped to $685/ton at the end of March, the lowest level since ChemOrbis began keeping records in 2008. Since then, prices have posted only slight changes week over week to be quoted at $665/ton recently.

Other markets have followed China’s lead as the below graph shows. The weekly average of PET bottle prices on CIF Southeast Asia basis has not seen any major changes since it hit a bottom in April. It is currently standing at $685/ton, the lowest level in more than a decade.

As for import prices in Turkey and Egypt, data show that prices reached their more than a decade low in May, and have fluctuated in a narrow range since then to be currently quoted at $710/ton and $700/ton CIF, respectively.

Pandemic deprived PET bottle markets of summer benefits

2020 has been an unusual year with a drastic reduction in social gatherings and tourism activities due to COVID-19. Amid cancelled business conferences, festivals, concerts and travel plans, PET bottle consumption significantly reduced and the market could not benefit from the traditionally vivid demand during the summer months this year.

With growing fears of a second wave of COVID-19 infections and renewed lockdowns, the last quarter of the year promises no major changes, either.

On top of that, challenges for PET bottle producers are mounting as the high season is already over in the Northern hemisphere.

“Usually September till November is the low season for PET and overseas demand is further dampened by COVID-19. The strengthening of the Chinese currency and increase in shipment fees have made it more difficult to export PET,” a trader in China explained.

Weak feedstock costs also put pressure on prices

PTA futures on the Zhengzhou Exchange and MEG futures on the Dalian Commodity Exchange have been falling recently, keeping up the pressure on China’s PET market.

In the spot markets, meanwhile, MEG prices on CFR China basis have also been moving lower for the past two weeks while spot PTA prices with similar terms have been largely hovering at around $435-445/ton since mid-May.

A seller in China lamented, “There is insufficient cost support. The downstream buying enthusiasm is not high.”

Chinese producers reducing operating rates

Several producers in China have already lowered their production rates to 85-90% to support PET prices while more suppliers are expected to start to reduce operating rates in October.

“Trading activity has also started to wane as market players finish their restocking activity ahead of the National Day holidays next week. The inventory level of sellers is quite high,” noted a player.

The holidays run across October 1-8 in China.

Buyers stay sidelined in Southeast Asia, Turkey and Egypt

Spillover sentiment from the subdued mood in China has kept buyers sidelined in the neighboring Southeast Asian markets as well as in Turkey and Egypt amid second wave COVID-19 fears.

“Traders are more willing to negotiate offers down to conclude some deals. Supplies remain comfortable amid slow buying,” a seller in Egypt said.

A few players in Turkey, meanwhile, opined, “PET bottle prices are likely to fluctuate within a narrow range in the near term, with little room to move further down as they are already at low levels. Increases are also unlikely due to the end of bottle season and large stock levels on the buyers’ side.”

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