The reasons behind PTMEG factories' commitment to price stability

In recent two months, negotiations in the PTMEG market have been unusually stagnant. The mainstream PTMEG sources saw a strong price increase in November, and in December, the prices of mainstream sources remained firmly supported. This strong price protection was mainly due to significant losses.

The price difference shown above is PTMEG price-1.28 * BDO price. It can be observed that with the rise in BDO prices in October and the continued decline in PTMEG prices, the price difference between PTMEG and its main raw material fell to a low point, once dropping below 1,500yuan/mt, resulting in severe losses. The normal price difference between PTMEG and its main material should be around 3,000yuan/mt, while a small number of lower-cost factories can maintain normal operations with a price difference of around 2,500yuan/mt. Under cost pressure, PTMEG factories firmly implemented price increases in November. Entering December, negotiations remained stagnant, but due to ongoing cost pressures and limited declines in the prices of upstream raw materials, cost support remained strong, leading PTMEG factories to maintain their prices.

Although PTMEG prices showed some firm trends, market pressures were also increasing. The inventory of the downstream spandex market were high, and with the approach of the Spring Festival, there is significant pressure on production and sales.

Although there was a slight decrease in inventory in late-November driven by downstream allocations, demand remained weak, and inventories in spandex factory rebounded in December. The operating rate of spandex factories slightly decreased to below 80% in December, but production and sales remained difficult to balance. Despite the stability of mainstream sources, spandex factories faced significant cost pressures, and some low-priced sources in the market aimed to recover funds, exerting pressure on the prices of mainstream sources. The cost pressure from spandex has been a major reason for the stagnation in PTMEG price negotiations. Additionally, the price difference between PTMEG sources has given downstream buyers a reference for negotiations, with the price difference between mainstream and low-priced sources currently around 1,000yuan/mt.

From the perspective of supply and demand, PTMEG supply remains relatively loose. As new facilities stabilize operations and supply increases, internal competition in the PTMEG market continues, resulting in relatively ample supply. Meanwhile, demand from the downstream fabric sector is beginning to slow down as the Spring Festival approaches, further increasing recent sales pressure on spandex. There may be production cuts in spandex facilities in January, and the supply-demand dynamics of the entire industry chain will face challenges.

Overall, the supply-demand fundamentals in the PTMEG market continue to face pressure, and internal competitive pressures persist. However, under severe losses, PTMEG must take measures to support prices.