The price spread between polyethylene terephthalate in Southeast Asia and Northeast Asia jumped to a five-month high of $15/mt Wednesday, from $10/mt a week ago, as high inventory levels in Northeast Asia curbed price gains there.
PET on an FOB Southeast Asia basis was assessed at $1,420/mt Wednesday, up $15/mt from a week ago, while PET on a Northeast Asia basis rose just $10/mt to $1,405/mt, Platts data showed.
This is the highest the PET FOB SEA/FOB NEA spread has been since December 5, 2012, when it finished at $20/mt. The spread stood at minus $10/mt over February and March this year, increasing to minus $5/mt early April. The spread continued to rise, flipping into positive territory on April 30, Platts data showed.
Market sources said PET inventory levels in Northeast Asia have been rising this year, particularly in China, due to weak demand amid a global economic slowdown.
This is despite Chinese PET producers cutting operating runs to an average of 70-80% of capacity this year -- in a bid to reduce stock levels -- from about 100% late last year, sources said.
"PET plant capacity in China is very large, like 1 million mt/year, while PET capacity in Southeast Asia is relatively small, at or below 500,000 mt/year. So the inventory pressure is much more serious in Northeast Asia than Southeast Asia," said one trader based in Japan.
As a result of high inventories, PET producers in Northeast Asia have been lowering their offer levels. On Wednesday, offers for spot PET cargoes were heard at $1,410/mt FOB NEA, while those basis FOB SEA were heard at around $1,430/mt.
But some market sources said the spread may narrow going forward as the effect of the PET run cuts in China filters through, and stock levels start to fall.
""In addition, PET demand in China is picking up for summer drink season," said one trader.
