What lies ahead for the polyester chain in 2020?

This article features highlights from the report: China to dent global polyester growth in 2020, but challenges surmountable. Fill in the form on this page for a complimentary copy of the full report, with charts and predictions for the year ahead.

1. Global growth is positive – even as Chinese growth slows

Polyester production growth will be positive in 2020. In fact, we expect global polyester production to near 90m tonnes by end-2020 – a significant milestone. As recently as 2016, production was just above 70m tonnes. Ten years ago, it was not even 50m tonnes.

The fact that production has almost doubled in a decade speaks volumes about this growth story. To read more about production growth and utilisation rates, fill in the form to get your copy of the full insight.

2. China poses the main challenge

It’s not all plain sailing. In the pivotal Chinese market, overall polyester growth is expected to moderate to just below 3% in 2020. This is a marked deceleration compared to 2018-2019 and is mainly due to slashed growth for bottle-grade PET.

The PET bottle segment is dragging down the whole chain with just about 61% of capacities expected to run, due to aggressive additions in capacities over the past three years.

Download the full insight to read more about the impact of this – and when we expect Chinese polyester growth to start bouncing back.

3. Price falls are likely as feedstock costs dip

Polyester values of various grades could see a general downtrend in 2020, mainly due to reduced raw material costs. As crude oil softens next year in general, paraxylene costs could follow suit. This, in turn, could bring down absolute price levels for purified terephthalic acid (PTA) and monoethylene glycol (MEG).

The majority of polyester producers are seeing prices of their own products trend the same way. But the good news is that margins might not be as squeezed as they were in H2 2019.

Read the full insight to find out why polyester producers might expect a more positive environment for raw material procurement in 2020.

4. Overcapacity continues – and MEG takes centre stage

Overcapacity is set to continue in 2020, to varying degrees for paraxylene, PTA and MEG. To a large extent, polyester producers have seemed most focused on the overcapacity in the PTA and paraxylene segments. But while the overcapacity theme is evident in these segments, we don’t believe that the glut in supply will be as serious as that for MEG.

MEG may be set to be the worst performer, in terms of pricing and margins. As the MEG oversupply takes shape into 2020, it could have a significant impact on producers’ margins. Read the full insight to find out more.

5. Acute supply disruptions may increase

Many polyester producers, as MEG end users, won’t just be focused on prices or the discounts for their contract volumes. They might instead be watching for when the less competitive MEG producers may be forced to shut temporarily, or even exit the market. Geopolitical tension could amplify this risk in the Middle East.

If not managed well, acute supply disruptions and price distortions could lie ahead.

How might the market respond? Could 2020 be a year for consolidation? To read more about our 2020 outlook, download the complimentary insight by filling in the form at the top of this page.