Commodities 2021: Global PET to rebound in H1 2021 as economic activity picks up

The global bottle-grade polyethylene terephthalate market could rebound in the first half of 2021 if demand recovers alongside an uptick in economic activity, should the coronavirus pandemic be tamed.

Bottle-grade PET demand may get a boost from the Tokyo Olympics due to take place in 2021, with large-scale sporting events traditionally lifting beverage consumption.

The return of sporting, music and other large-scale events in 2021 would push up demand after global bottle-grade PET markets sank to record lows in 2020.

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Antidumping concerns spread in Asia

Asian PET producers are concerned about antidumping investigations in India and the US, which could push down demand for bottle-grade PET from Northeast Asia, notably China.

China has the largest share of PET production in the world, accounting for around 30%. Asia, excluding China, accounts around 21% of global production.

The US slapped antidumping duties on PET film from Brazil, China, Thailand and the UAE in September at 3.49-76.72%.

India is currently investigating antidumping duties on PET from China. The final findings are due to be announced on Dec. 31.

In December 2017, Japan slapped anti-dumping duties on Chinese PET resin at 39.8-53%. The duties are due to expire on December 27, 2022.

Meanwhile, Chinese PET is the target of an Indian antidumping investigation.

US to import more PET in 2021

US imports of PET are expected to grow in 2021 amid continued strong demand, hurricane-related disruptions, and limited truck availability.

Although on-the-go consumption of bottled beverages has fallen significantly since the start of the coronavirus pandemic in early spring, any demand loss in away-from-home channels was replaced, even outpaced, by increased multipack buying, and a surge in restaurant takeouts and delivery orders.

A shortage in aluminum can capacity due to stockpiling as well as increased demand for canned foods, particularly soups, also led many food and beverage companies to switch to PET packaging.

Robust demand, in addition to multiple facility outages in the third quarter, amid a record-breaking hurricane season in the US Gulf Coast, led to a significant drop in PET inventory levels and higher domestic prices by the fourth quarter.

"The fourth quarter is when demand is supposed to drop off so that inventory levels can recover," a source said. "That is not the case this year."

Operating rates increased from 89% in 2019 to 93-94% in 2020 to keep up with demand, the source said. Higher utilization rates are expected to continue into 2021.

To further compensate for depleted inventory levels, participants expect the US -- already a significant net importer of PET - to have to rely heavily on imports. Although year-to-date imports through September were down nearly 100,000 mt year on year amid high ocean freight costs, imports from Mexico were up almost 10% year on year.

In general, US demand for PET is expected to remain strong throughout the first half of 2021 as participants remain optimistic that COVID-19 vaccines, as well as economic recovery, are on the horizon.

"I do expect if there is a vaccine by spring, we will see a boom in building, which would increase the [PET] polyester market," a Midwest broker said.

However, some market participants predict an increase in transportation issues in the coming years as trucking booking capacity becomes increasingly harder to secure as e-commerce retail platforms, such as Amazon, grow ever more popular.

Europe's demand recovery may be short-lived

In Europe, the news of COVID-19 vaccines has lifted market sentiment for 2021 but this is likely to be short-lived.

European PET producers said they do not expect a quick recovery as demand is likely to remain on the low side. With European economies affected by COVID-19 and people staying at home amid lockdowns, demand in the first quarter is likely to be lackluster, a producer said.

In the meantime, some European market players consider the potential of higher import prices raising spot prices in Europe at the beginning of the first quarter.

"They [imports] will lift up prices regardless of whether they come at higher prices or don't come at all," the trader said.

Higher freight rates from Asia to Europe have lifted the prices of PET imports in the fourth quarter as container carriers implemented void sailings to restrict demand.

"If you buy now, arrival is in January, start of February," a European converter said, adding that some market players are currently buying to be on a safe side.

Nevertheless, market sources say there is potential for prices to go the other way at the start of 2021. If everyone ends up with full stocks of resins and demand remains low, prices could be lower, the converter said.

The persistence of the coronavirus pandemic could absorb the impact of more expensive imports, other sources said.