Dropping BDO weighs on PTMEG price

BDO price hiked in Jan-Feb, 2021 but downstream market failed to trace uptrend on BDO market. Downstream players resisted high BDO price, ending up with dwindling demand. As a result, price of BDO started falling from Apr, with decrement at around 18% by Apr 23. Downstream buyers were still reluctant to purchase amid such decrement and continued bargaining for lower price.

Participants on PTMEG players more strongly expected PTMEG price to decline due to reducing BDO price. Cost and supply/demand is decisive to PTMEG price tendency.

With falling cost, price spread between PTMEG and major feedstock (1.3BDO) has widened. Settlement price of PTMEG in early-Apr was basically flat with that in Mar due to the monthly pricing mode. With falling BDO price, price gap between PTMEG and major feedstock has increased to above 10,000yuan/mt.

As for market fundamentals, demand for PTMEG from spandex field remained strong while that from non-spandex sector was sluggish. However, 80% of demand for PTMEG was contributed by spandex market.

Operating rate of PTMEG plants kept above 90% in Jan-Apr, which consolidated around 85-95% from late-Mar to Apr after BASF Markor, Hangzhou Sanlong and Hyosung Chemical successively commissioned maintenance. Downstream spandex plants continued running at around 95% capacity.

Price of spandex was also under burden, but rigid demand for PTMEG may sustain when spandex plants saw high run rate, low stocks and high cash flow. Actually, spandex factories focused on digesting PTMEG bought before, expecting PTMEG price to fall.

Stocks of PTMEG started accumulating when demand from new spandex unit does not release temporarily and downstream buyers concentrated on digesting PTMEG purchased before. If PTMEG plants continue running at full capacity and want to achieve 100% of sales ratio, factories may have to work hard to snatch customers.

PTMEG prices may face downward pressure after Q2 based on market fundamental and cost side. The actual range depends more on the downward space on BDO market. According to the downtrend on BDO market and the expectation and buyers and sellers, sellers may insist on price above 40,000yuan/mt in May but buyers are expected to dampen price. Overall price of PTMEG may be stagnated around 40,000yuan/mt in May.