Opinion

Can the polyester industry recover from Covid-19’s shockwaves?

Volume loss, overcapacity and margin squeeze have taken a toll – but there are bright spots

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With contributions from Peter Martin, Alexei Sinitsa, Chloe Kinner, Joyce Grigorey, Arthur Luo, Andrew Day and Patrick Kirby

2019 was a challenging year for polyester, characterised by overcapacity, weakening prices and squeezed margins and complicated by the US-China trade war. 2020 was shaping up to be a better year – before the coronavirus sent a shockwave through the industry, turning consumption upside down and significantly impacting demand.

As many non-essential retailers closed as a result of efforts to curb the pandemic, end-user demand for fibres and textiles – the largest consumer segments of polyester by far – took a sharp knock. While there have been some bright spots, such as the increased demand for personal protective equipment (PPE), the road to recovery is expected to be a long one.

It’s clear that market dynamics have changed after a year of unprecedented challenges, with many producers concerned about their ability to keep their heads above water long enough to see full recovery. Our team of industry experts explored the main issues facing the polyester value chain, from oil prices through to product markets, at our recent European Polyester Conference. In this article, we summarise some of the key discussion points, including:

  • How will the pace of economic recovery affect demand for polyester, plastic and packaging?
  • Has PET proved recession-proof – and has the impact of the pandemic varied by region?
  • How have global lockdown measures affected RPET demand and prices?
  • Can fibres demand recover from its hard knock?
  • Has overcapacity created a perfect storm for polyester raw materials?

The clouds begin to lift for the global economy, but will it fully bounce back?

Covid-19 has prompted the worst global recession since the Great Depression. As restrictions on movement are lifted, economic activity is rebounding. However, it will take at least until 2022 before we see a global GDP return to 2019 levels.

We expect the pandemic to leave permanent scars on the economy. In 2025, GDP could be as much as 4.5% below our pre-Covid economic outlook – with a significant cumulative loss of US$28 trillion in output.

Policymakers considering the difficult task of how to dig the economy out of a post-pandemic hole may turn to green stimulus measures, which could provide a boost to the energy transition – and potentially add momentum to the materials transition.

So how will the path to economic recovery affect demand for polyester, plastic and packaging? And will the dimmer economic outlook exacerbate the overcapacity problem in the value chain?

The coronavirus crisis put a temporary pause on the war against plastics. Despite the economic shock seen in 2020, PET demand has shown great resilience. The pandemic, and a move to home-based living, has boosted grocery sales and increased demand for PET packaging within some food, beverage and PPE sectors. In comparison to other industries, the PET resin market has largely been shielded from the worst of the fallout.