Global : Surge in Polyester Prices Depress Textile Processors

Since polyester prices continued surging in the past two weeks with March contracts dramatically raised as a result, the current level in costs could force a series of textile processors in Asia to reduce margins or stop manufacturing spun yarns and polyester fabrics.

Boosted by the surge in oil prices, polyester's raw material costs again rose in the past week.

Prices of purified terephthalic acid (PTA) and mono ethylene glycol (MEG) are now reaching the level of US$800 per ton in the Far East after paraxylene prices also surged this month.

Oil prices reaching new record high

MEG prices were up about 80% since the end of November while PTA prices rose about 50%. Oil prices continued increasing in the past week, with benchmark Brent Tuesday reaching a 27-month high at US$33.72 per barrel.

In addition to a war threat in the Middle East, oil prices are now boosted by the rise in oil consumption in North America after temperatures up to arctic levels in the US Northeast.

Natural gas prices also surged at the same time.

Uncertainties about a possible war between the US and Iraq were arising after Spain on one side and France and Germany on the other side introduced opposed resolutions at UN Security Council.

Such as in the Far East, PTA and MEG prices surged in the South Indian continent, forcing polyester makers in raising prices.

MEG prices now reach US$720 per ton, compared with a level of US$480 per ton in December. PTA prices rose from US$545 per ton up to US$810 per ton at the same time.

Textile producers unable passing prices

Downstream producers in Asia are now meeting serious difficulties as a consequence. In South Korea, weavers were forced dramatically reducing margins, since they are not able totally passing such an increase in prices.

In China, a series of producers of polyester textiles even stopped producing in order to avoid accumulating losses. Prices of polyester staple fibers slighlty declined, however, from the level reached after the end of Chinese new year's holidays, two weeks ago.

Final apparel demand from the US and the European Union is already slowing down after economic growth fell in both regions.

The new level in polyester and cotton prices could add to coming depression on US and EU markets, increasingly looking for lower prices at the same time.