MEG prices have begun heavily falling in Asia and could continue dropping in the coming weeks due to long-term structural trends. PTA prices are bottoming out by contrast, in line with a very strong demand from polyester producers in China and a fall of production levels due to a series of maintenance operations.
PTA prices could steadily rise in the coming weeks in Asia whereas MEG is about to further drop.
Market fundamentals are now driving the raw material costs of polyester fiber producers.
Excess supply is now structural on the global glycol market and prices should be depressed whatever the high level of polyester production in the current period in China.
Spot MEG prices have lost 28$ per metric ton or 4.4% in the last seven days in Asia whereas they were falling 237 yuan per MT in China, or 4.7%, being down 7.1% in four weeks.
The new market for MEG futures in Dalian has reflected poor anticipations with the nearby contract June 19 dropping by 4.7% and July 19 even plunging by 6.2% in the last seven days.
Although a series of maintenance operations are planned for the second quarter in China, production cuts will be much lower than a year ago on the market.
In China, like in India, glycol imports have dropped in the past months amid heavier inventory pressure.
The long-term fall of MEG prices has therefore resumed and should not be stopped in the coming weeks, in line with the commissioning of new coal-based capacities in the past months in China.
By contrast with MEG prices, PTA prices could now bottom out in Asia, over a number of maintenance operations affecting large capacities.
Operating rates have already reached 88% at PTA plants in China, amid low inventory levels, leaving room for higher prices in line with a strong demand.
Operating rate at polyester plants have now climbed above 90%, due to a very strong production at filament weaving mills in Jiangsu and Zhejiang (79% of capacities).
Paraxylene prices could also bottom out after heavily falling in the last weeks over the addition of new and large capacities in China.
A series of facilities have been shut down in order to limit losses.
Negotiations with largest customers of the PTA industry have failed in settling an April ACP (Asia Contract Price) for paraxylene.
Crude oil prices are also very firm and could continue rising, as Saudi Arabia intends further lowering its production in April ahead of a new agreement between members of the OPEC-Plus group of producing countries.
Source: Emergingtextiles
