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While MEG prices sharply rise in Asia......

Polyester prices are rebounding in China

Polyester prices are now clearly rising in China, as a result of higher demand and a new increase in costs of polyester intermediates, mainly Mono Ethylene Glycol (MEG). The rebound in prices in China and Asia is a first sign of a possible recovery in global textile and apparel business in the coming months.

China’s polyester prices have started rising again with prices of draw textured yarns (DTY) up about 300 yuan per ton while fully drawn yarns (FDY) rose about 200 yuan per ton. Prices of polyester oriented yarns (POY) were not changed, apparently. Prices of polyester staple fibers have slightly increased to about 9,300 yuan per ton.

After declining from a peak reached by mid-February, polyester prices rebounded from the start of May when SARS began vanishing in continental China. DTY prices (100D,36f), for example, rose from about 9,000 yuan per ton by the end of April up to 11,200 yuan by mid-July, a 24% increase. FDY prices (75D/36f) surged from about 9,800 yuan to 12,000 yuan at the same time, a 22.45% rise.

Since new capacities are being launched every month in China, the future increase in prices will also depend of available offer. Total production of polyester was up 22.20% in the first four months of 2003 at 1.33 million tons, according to just released official data. At the same time, consumption increased by 21.36% at 1.41 million tons while imports rose 13.42% to 95,300 tons or only 6.72% of total consumption.

In the short term, the current surge in prices of polyester intermediates could result in higher polyester filament prices. If average price of Purified Terephthalic Acid (PTA) is not rapidly rising in China and elsewhere, MEG prices are once more sharply rebounding as a result of a lack of supply in China while demand from polyester producers is increasing. Saudi Arabia’s Sabic just announced its Asian contract price for August at US$650 per ton, up US$50 or 8.33% from the July level.

Rival Shell even raised its price to US$690 per ton, up US$20 or 3%. The current rise in oil prices will not reverse this upward trend. Benchmark Brent reached more than US$29 this week, progressively increasing since the end of the war on Iraq, three months ago.

OPEC members are not expected raising production levels when they will meet by the end of the month, however. Oil ministers actually fear that any return of Iraqi oil on the world market would rapidly depress prices. Confronted with a continuous lack of security at Iraqi oil installations, US companies are unable raising domestic production, however.