October 03, 2022 • PET Raw Material Futures Outlook • 3 min read

PET Resin Export Demand

Faces Uncertain Q4
Author: Gareth Lamb

Insight Focus
• Falling crude and weaker than expected polyester demand drives PTA and MEG futures lower.
• China’s October Golden Week sees markets closed until October 10th.
• PET resin export demand is clouded in uncertainty as availability lengthens.

PTA Futures and Forward Curve

• PTA supply tightness has eased slightly as PTA plant operating rates gradually recovered following recent
typhoon disruption.

• However, PTA demand is set to weaken following China’s National Golden Week holiday as polyester
plants cuts production as peak season fails to materialise.

• In the short-term, PX supply tightness continues to constrain PTA production. However, weakening
demand and greater PTA liquidity is expected to see the PTA-PX spread narrow in October.

• The PTA forward curve has steepened in backwardation with the Jan’23 contract closing last week at a
RMB 602/tonne discount to the current month.

ZCE PTA Futures Prices ZCE PTA Forward Curve

RMB/mt Jan'23 May'23 Sept'23 RMB/mt Current One Week Ago
8,500
6,200

7,500
5,800
6,500
5,400
5,500

4,500 5,000
Jun'22 Jul'22 Aug'22 Sep'22 Oct'22 Jan'23 Apr'23 Jul'23

Contract Last Week’s Close (RMB/mt) Current Week’s Close (RMB/mt) Change
C1 6,072 5,956 -1.91%
Jan'23 5,608 5,354 -4.53%
May'23 5,406 5,180 -4.18%
Sept'23 5,322 5,126 -3.68%

Note: C1 refers to the current month’s contract. May, September, and January contracts are typically the most traded
months.
PET Raw Material Futures Outlook

MEG Futures and Forward Curve

• MEG Futures turned bearish once again last week driven by falling crude prices and fears of a global
economic downturn.

• MEG port inventories continued to decrease, in part due to a supercharged US dollar, with some supply
switching to domestic coal-based units instead of dollar denominated imports.

• Downstream demand outlook has turned pessimistic, with polyester operating rates now in reverse and
set to fall further following China’s National Golden Week holiday.

• The MEG forward curve remains in contango, although the curve has begun to flatten in recent weeks,
with the Jan’23 contract at a small RMB 63/tonne premium to the current month.

DCE MEG Futures Prices DCE MEG Forward Curve

RMB/mt Jan'23 May'23 Sept'23 RMB/mt Current One Week Ago
6,000
4,600

5,500

5,000 4,400

4,500
4,200
4,000

3,500 4,000
May'22 Jun'22 Jul'22 Aug'22 Sep'22 Oct'22 Jan'23 Apr'23 Jul'23

Contract Last Week’s Close (RMB/mt) Current Week’s Close (RMB/mt) Change
C1 4,338 4,261 -1.78%
Jan'23 4,400 4,306 -2.14%
May'23 4,431 4,341 -2.03%
Sept'23 4,324

PET Resin Export - Raw Material Spread and Forward Curve

• Chinese PET resin export prices decreased last week averaging USD 1010/tonne by Friday, down around
USD 40/tonne on the week, and USD 70/tonne for the month.

• The weekly average PET resin–raw material physical differential increased USD 4/tonne, from the
previous week to USD 178/tonne. By Friday, the daily spread fallen back to around USD 165/tonne.

• Primarily driven by changes in the PTA outlook, the raw material forward curve moved lower and
steepened in backwardation over the last week. The Jan’23 contract discount to the current month
widened to USD 70/tonne.
PET Raw Material Futures Outlook

PET Resin Price vs. Feedstock Futures PET Raw Material Cost Forward Curve
RM Spread PET Resin FOB Feedstock Cost
USD/mt Current One Week Ago
USD/mt
950
1,500 550
1,250 450 900
1,000 350
750 250 850

500 150
800
250 50
0 -50 750
Feb'21 Aug'21 Feb'22 Aug'22 Oct'22 Jan'23 Apr'23 Jul'23

Contract Last Month Last Week Current Week Weekly Change

PET Resin FOB China 1,080 1,050 1,010 -3.81%
Feedstock Cost 949 879 845 -3.90%
Physical Differential 131 171 165 -3.33%

Note: ‘Last Month’ refers to date one month prior to ‘Current Week Close’.

Concluding Thoughts

• Chinese futures markets will be closed during the National holidays between 1 st-7th October, reopening
on Monday 10th October.

• On reopening, PET resin export prices look set to come under sustained downward pressure through Q4.

• Raw material fundamentals have turned negative following a weakening downstream demand outlook,
and PET resin export demand is clouded in uncertainty.

• Availability has lengthened over the last month, with material still available for October and November
shipment; price levels for Dec’22 were heard at a USD 20-30/tonne discount to the current level.

• Whilst the collapse in ocean freight favours Asian exports and could support improved demand, the
relentless surge in the USD dollar has eroded some of their competitiveness into markets, such as
Europe.

• The addition of new and restarted capacity coming onto the market in Q4’22 is also expected to add
weight to this downward pressure.

For PET hedging enquiries, please contact the risk management desk at MKirby@czarnikow.com.
For research and analysis questions, please get in touch with GLamb@czarnikow.com.

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PET Raw Material Futures Outlook

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