Subdued Demand from Downstream Influencing PTMEG Prices

Shanghai (China): Following a decline from mid-April 2024, PTMEG (Polytetramethylene Ether Glycol) prices in China's domestic market continued their downward trend, influenced by various factors. These included reduced demand from downstream spandex industries and an oversupply situation. The spandex market had been declining since mid-April, with some manufacturers reducing production while others maintained high capacity, resulting in stable overall operating rates despite sluggish downstream demand and inventory pressures for certain producers.

Negotiations remained deadlocked amid concerns over factory losses and narrow profit margins, contributing to a subdued trading atmosphere. Anticipation of reduced downstream production during the May Day holiday and the shift towards the off-season further weakened demand expectations. However, amidst these market dynamics, upstream crude oil prices showed a steady increase due to positive signals from US demand and geopolitical tensions in the Middle East. Supply concerns were heightened by recent incidents targeting Israeli interests, along with US sanctions on Venezuela and uncertainties regarding potential interest rate cuts by the US Federal Reserve, impacting global oil prices and the petrochemical industry. Nonetheless, the low prices of feedstock tetrahydrofuran and coal helped offset PTMEG production costs.

Over the past few weeks, trading activity for PTMEG has remained sluggish in China, characterized by limited inquiries and subdued demand. Concurrently, spandex prices in China have experienced a significant decline, plummeting by approximately 65% from their peak value since late 2021. Furthermore, PTMEG orders from European countries have also decreased due to geopolitical tensions, heightened inflation, and economic challenges, impacting the purchasing power of European consumers, particularly in the home textiles sector. These unfavorable conditions have resulted in reduced sales and profit margins for PTMEG market participants, leading them to adjust their ex-quotations downwards to stimulate sales.

Additionally, the spandex industry in China has encountered profitability challenges, with many companies facing declining sales despite a peak in capacity growth. The lack of robust support from feedstock tetrahydrofuran has further contributed to the downward trajectory of the market. PTMEG demand remains lackluster both in China's domestic market and globally, primarily due to multiple factors, including underperformance in the downstream textile industry. The continuous decrease in spandex costs has worsened due to global slowdowns in garment demand and economic uncertainties. This prolonged downturn has notably subdued market sentiments, with minimal overall buying optimism. The stagnant momentum in the downstream textile sector, along with subdued economic conditions, has further aggravated the situation, leading to a significant reduction in PTMEG demand.

In the coming month of May, the price of PTMEG is anticipated to remain low due to several factors. Firstly, the market is expected to experience downward pressure on prices owing to an abundance of inventory. This surplus stock is likely to persist, further dampening market sentiment and contributing to price declines. Secondly, demand from the downstream sector is not expected to be robust, as indicated by anticipations. With subdued demand from downstream industries, particularly in textiles where PTMEG finds application, the overall market demand is likely to remain subdued. Lastly, while spandex factories are anticipated to reduce production, there will still be sufficient supply in the market. This surplus supply situation will make it challenging to provide favorable support for the spandex market, thereby affecting the demand for PTMEG as well. Overall, these factors collectively suggest that the price of PTMEG is likely to remain low in the upcoming month.