Integrated PET spread outperforms in 4Q24
Higher oil prices and lower petrochemical demand have led oil refineries to cut their operating rates and naphtha production, pushing naphtha prices up 3% WoW to US$642/t, in turn subtracting 2-8% WoW from petrochemical product spread, mainly polyolefins, where demand-supply imbalance is significant. Despite the ongoing weakness in the petrochemical market, integrated PET spread was relatively better in 4Q24 (benefiting IVL) due to lower feedstock costs, especially for PX. It is too early to assume the uptrend in integrated PET spread will continue into 1Q25, as lower feedstock availability may tighten PX supply. Stay cautious: outlook is discouraging.
Average PE/PP spread pulled back by higher naphtha cost. Polyolefin product spread, excluding LDPE, fell 8% WoW to US$335/t, below cash cost of US$350/t, due to higher naphtha cost. Sluggish demand for year-end destocking and market concerns the US-China trade war will return plus more trade protection by the US against exporting countries could eat into international trade flow, including petrochemicals, amidst the persistent demand-supply imbalance.
Benzene spread down WoW on higher feedstock cost. Benzene spread fell 2% WoW to US$269/t on higher naphtha cost, although benzene price was still supported by stronger demand from downstream styrene and phenol after production resumed after maintenance in November. Average benzene spread in 4Q24 is down 22% QoQ to US$249/t vs. 12MMA of US$313/t. PX supply remains abundant on a rise in operating rate to 70%± in Asia, aligning with strong demand from PTA plants to accommodate polyester production despite unplanned shutdowns. PX spread in 4Q24 is down 25% QoQ to a 4-year low of US$253/t, less than half of its peak in 2Q22.
Integrated PET spread fell WoW but still outperformed in 4Q24. Higher feedstock cost (PX, PTA and MEG) for integrated PET producers led to lower integrated PET spread (-10% WoW) last week despite stable PET bottle chip price at US$820/t, at a 3-year low for the last four weeks. We believe this reflects sluggish trading volume in off-season and converter caution on demand in a well-supplied market. Asia’s integrated PET spread is at a 6-quarter high of US$136/t (+14% QoQ), outperforming other chains in 4Q24. However, this is unlikely to continue in 1Q25 if higher demand for gasoline blending reduces feedstock availability for PX production while weak oil price caps PET price upside despite tighter supply ahead of Chinese New Year in late January 2025.
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