For the synthetic fibers, raw material costs are up over July. And in Asia, these raw materials, especially PX/PTA and MEG, are a little tight. The rise in oil prices is driving some of this increase but more importantly it is the tightness in refined products. That is unlikely to ease in the short term.
Logistics are also high and rose through August, especially to North America and intra-Asia. Port congestion and container shortages in some Asian countries are having an impact on logistics costs as are diesel prices. Some countries are facing energy disruption as well as logistics disruptions, for example Bangladesh. And China is suffering from a number of storms that are disrupting port activity.
In Europe it is not that there are raw material shortages as such, although the drought is affecting river transport in the region as well as raising logistics costs. The problem is how weak demand actually is. Production adjustments in the auto sector are definitely having an impact. Also, there are textile supply chain adjustments that will hit smaller companies and especially smaller European companies hardest. This is the Packaging and Packaging Waste Regulation that came into force on August 12th. This seems to have caught many small companies by surprise, especially the thousands of digital entrepreneurs selling the odd bit of merchandise.
August can be described as a month of cost push and ordinary demand. In Asia, it is the cost push that dominated. In Europe, it is the more than ordinary demand. The outlook for European retail demand later in the year appears increasingly bearish. A number of European countries have sent prepping pamphlets to their citizens. And European citizens are looking at rising taxes, rising cost of living and potentially another large hike in energy bills since the gas inventory build before winter is lagging far behind where it should be.
