The polyester intermediate market ignored a new dramatic fall in crude oil prices in the past week. PTA and MEG prices even rose on spot markets in Asia, as a clear sign that drastic production cuts are now stabilizing the market. The polyester pipeline may have found a bottom after the sharp decrease experienced in the past two months.  
   
The fall in crude oil prices is not affecting the polyester pipeline any more.

While oil futures sharply declined in the past week in New York, polyester intermediate prices were not reacting in Asia.

After clearly rebounding on Monday morning, crude was still down more than 12% from its level a week earlier.

By contrast, PTA and MEG were up 1.8% and 4.3% on Asian spot markets in the last seven days.

This is a clear sign that intermediate prices are now disconnected from the sliding oil market and may have reached a bottom in the past weeks.

Production Cuts in Asia

Although paraxylene spot prices significantly declined in the last week in addition, they did not fall in line with the dramatic decrease in crude oil prices, however.

If raw material costs of polyester fiber industry are no more sliding, this is clearly due to production cuts in Asia.

All major producers of paraxylene and PTA have announced lower operating rates in the past weeks with capacity utilization often down to 60%.

With lower available supplies in Asia, prices started resisting any new decrease in crude oil prices, not surprisingly.

Production costs are increasingly falling in addition, as inventories which were purchased at a higher price in the last months are being progressively digested.

Bottoming Out?

The current stabilization does not mean that intermediate prices will sharply increase in the coming weeks, therefore returning to more usual levels after reaching historical lows.

Any new rise in PTA prices may result in larger production in Asia, as soon as margins will be restored to acceptable levels.

There already were a few announcements of a return to higher operating rates by a series of Asian makers.

Production cuts which had been initially planned for January could also be cancelled.

Demand from polyester fibers may continue declining, in addition.

China's polyester fiber production may stabilize or even slightly decrease in the coming year, in line with the textile crisis in the country.

(Source: Emergingtextiles)