Friday 29 Mar 2024
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KUALA LUMPUR (Feb 4): The polyester chain looks determined to shake off the pessimism seen in much of 2020 and early 2021.

In a commentary on Thursday (Feb 3), energy research and consultancy Wood Mackenzie (WoodMac) head of polyesters Salmon Lee said recovery is under way, and while headwinds remain, there are also reasons to be optimistic about the year ahead.

Price

Lee said polyester prices had started to come off from the peaks seen earlier in 2021, and raw material prices had declined sharply as the overcapacity translates into oversupply.

“While we continue to predict an overall firming trend for prices of most products in the polyester chain — mainly due to heightened costs with a rebound in crude oil prices — maintaining profitability is another question altogether,” he said.

Supply chain

Lee added that the results of such actions were mixed in 2021.

He said supply chain woes also further complicated the issue as producers had to battle both feedstock costs and escalating freight costs.

“We don’t see 2022 ending this ordeal for most of these producers. In fact, the margin squeeze could worsen for some into the next year or two.

“Rationalisation of capacities has started and seems likely to amplify to become a norm in 2022 and beyond,” he said.

Sustainability

Lee noted that besides the futures markets, other factors to consider when participating in this business include the sustainability drive that had taken the petrochemical industry by storm in the past few years.

“In 2021, we saw the [Covid-19] pandemic accelerate sustainability efforts, while the power restrictions in China between September and October (imposed to meet carbon emissions reduction targets) saw PET and polyester fibre producers forced to reduce operations amid power cuts.

“Fundamentally, the polyester chain is facing a series of impacts going forward — from how reduced consumption of gasoline would affect aromatics availability to a surge in demand for recycled fibres,” he said.

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