PTMEG sees improving fundamentals but transmit to downstream market stifled

With recovering demand, supply of PTMEG was easy to be tight but hard to be ample. However, downstream spandex market met resistance in tracing the uptrend on PTMEG market due to increasing supply but lackluster demand.

Price of spandex started falling from the fourth quarter of 2021 and gradually decreased to 52,000-54,000yuan/mt, down by around 25,000yuan/mt compared with the high level in Q3 2021. Price of PTMEG also began reducing in Jan-Feb, 2022, down by around 7,000yuan/mt compared with the highest level in Q4 2021. The decrement of PTMEG was apparently smaller than that of spandex. As a result, the profit of spandex substantially shrank. The mainstream spandex variety 40D was close to the cost line again.

As downstream market was hard to follow the uptrend on PTMEG market, price of PTMEG only slightly increased in Mar even after sales ratio rose and cost ascended. The confidence of PTMEG suppliers needs time to recover after being low in Jan-Feb.  

PTMEG market is still expected to witness improving fundamentals in short run, while downstream spandex market encounters bigger pressure to trace the uptrend on PTMEG market as demand is not good during the peak season:

Demand: spandex plants run at high capacity. New units also gradually start operation. Demand for PTMEG still enjoys strong support.

Supply: HNEC’s 30kt/year project is expected to resume operation. Effective supply is estimated to increase in late-Q2. Hyosung Ningxia’s project is also scheduled to commission operation, mainly for self-sufficiency. New supply of PTMEG remains limited.

Mindset: price of spandex is estimated to face big downward pressure with rapidly increasing supply. In addition, affected by the pandemic, the performance of traditional peak season (Mar-Apr) is not good temporarily. Export orders are expected to be hard to be as good as last year as the production is recovering in Southeast Asia. Spandex companies show stronger cautious mindset amid high cost and with resistance to follow the uptrend on feedstock market. Spandex plants become more eager to bargain for lower price of PTMEG. As more than 80% of PTMEG plants are integrated suppliers, most are lucrative and show weak intention to raise price only because there is bullish support from supply and demand. In one word, cautious mindset intensifies on the market.

Although PTMEG market is expected to see growing new demand and tight supply, price of PTMEG is more likely to curve a mild trend in short run when the whole industrial chain is balanced and sellers have to guarantee sales volume.