Polyester markets in doldrums?. Factors to recover
Polyester markets, particularly in Asia, were in a state of stagnation or depression in July 2019, the worst of all Julys in multi years. The previous worst July was of 2016 when prices had hit a 10 year low. So 2019 was the second worst July since 2006. July is traditionally a lull month for demand and capacity utilisation dips as operations are controlled to ensure minimum stock pile.
This July, prices of 1.4-1.5 D directly melt spun polyester staple fibre in local markets averaged US$1.17 a kg in China, US$1.27 a kg in Pakistan, US$1.33 a kg in India and US$1.05 a kg in Taiwan. They were 10-19% down compared to July 2018, with Taiwan posting the sharpest fall.
Two factors, other than a dull month, determined the markets this July; falling raw material cost and escalating US-China trade war. Purified terephthalic acid, the major component for producing polyester, prices had crossed US$1,000 a ton mark in September 2018 have fallen to around US$750 a ton in July. This was about 30% decline in cost. The previous over US$1,000 mark was hit in August 2014.
Mono ethylene glycol, also used to make polyester witnessed run rates rising since late June on price rallies. Declining inventories at east China ports also improved market sentiment and prices climbed. As a result, some coal-based MEG plants also resumed operation and ethylene-based plants increased run rates. Prices were at their lowest since May 2009 with July averaging US$535 a ton CFR China. This was almost at half the level of latest peak price of US$1,006 a ton hit in April 2018.
Going forward, polyester market recovery begins from hereon but needs ample demand support. Global macroeconomic situation appear dismal at the moment, but any conclusion in ongoing talks between US and China will bring greater relief to the industry, rather from cost support. PTA and MEG prices are hard to move up on their own fundamentals, unless demand starts recovering. And that will depend on the polyester markets. Offlate, polyester markets are seeing slight improvement, but not as usual. End-August to early September will be crucial for demand to rebound, if global factors permit.
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