FEATURE: Surging container rates slash US PET imports, boosting domestic prices

Houston — Record high container shipping rates have impacted the US import market for polyethylene terephthalate (PET) resin by slashing shipments to the US and giving a boost to the domestic industry.

US prices for the clear plastic resin, used to make drink bottles, had been steadily declining for almost two years until June 2020, when the market staged a recovery, which brought domestic prices to a multi-year high in April.

S&P Global Platts assessed US prices for bottle-grade PET railcars at $1,389/mt on April 28, up by 47% from June 24, 2020, and the highest level since May 29, 2019. Import prices for bottle-grade PET on the US West Coast followed a similar trajectory, rising by 64% from June 24, 2020, to $1,521/mt on April 28.

The upturn in domestic and import PET prices tracked the rise in global ocean rates for shipping by container, which is the primary means of transporting PET resin to the US, sources said. Platts Container Index, a weighted average of Platts container freight rate assessments, was assessed at $4,417/FEU on April 28, an increase of 248% from June 24, 2020.

Container rates were unexpectedly given a lift by the coronavirus pandemic, which forced people around the world to practice social distancing and sharply cut spending on services such as travel and eating out.

People in North America and Europe responded by shifting consumer spending toward goods, pushing US import volumes from Asia to record high levels, which overwhelmed major gateways such as the Port of Los Angeles. This, in turn, led to shortages of empty containers at Asian export hubs.

Retailers passed on higher logistical costs to consumers, but this was more challenging for importers of PET as US bottle producers have domestic supply alternatives.

"The freight cost for the long-haul is so high right now," an Asian PET resin producer said. "For example, Asia-to-US West Coast freight is listed at $3,200 per container, but need an additional $6,500 to secure the box, which brings the freight to $9,700 for 22 mt of cargo, which means the freight itself will be $441/mt. Most buyers will not able to afford such freight."

In the most recent trade data available from the US Commerce Department, total US PET imports were 73,204 mt in February, down by 39% from January. It was the first month that imports dipped below 100,000 mt since October 2020.

That trend has not changed in the past two months. A deep freeze across southern US knocked out a large chunk of PET feedstock production capacity in February, but importers were discouraged from looking for imports as container volumes at US ports continued to swell, causing severe port congestion. Domestic PET prices have gained 21% since Feb. 24, just after the freeze hit the Texas petrochemical industry.

"[There's] definitely a shortage," said one PET trader. "It's next to impossible to get containers in or out of the US."