FOCUS: Nov Euro PET weighed by ample supplies

21 November 2005 16:46  [Source: ICIS news]

By Benjamin Purvis

LONDON (ICIS news)--Poor demand is driving polyethylene terephthalate (PET) prices lower and they are set to fall over the next two months as the European market is fundamentally oversupplied, industry sources said on Monday.

They said weakening feedstock prices were also likely to play a significant role and most expected prices to continue to fall in December and January.

The majority of November business has now been settled at an average price decrease of Euro30/tonne, although some players have reported a wide range of scenarios from small increases through to Euro70/tonne decreases.

Sellers had initially targeted price increases of up to Euro130/tonne but this proved to be unachievable and many soon adopted rollover targets. Some rollovers and small increases were reported early in the month, but prices have since slipped.

Most producers have indicated average decreases of Euro15-40/tonne on October levels while buyers reported settlements at minus Euro20-50/tonne. One buyer reported an even larger fall similar to current prices of Euro70/tonne below October contract levels.

Both buyers and sellers agreed that demand for PET was exceptionally poor at the moment. Recent attempts by producers to increase offtake volumes have been largely unsuccessful, several key sellers said. Quite a few producers said they have now tailored production to the reduced demand situation.

A number of customers said that they were not keen to purchase material at the moment and want to maintain a low stocks in anticipation of further prices falls.

Consumers' move to maintain low stocks also led to an increase in prompt material as purchasing was done on a “hand-to-mouth” basis.

There was general agreement that the market was fundamentally long, although a few producers remained optimistic that seasonal factors would provide a boost to pricing by early December.

This fundamental oversupply was likely to be exacerbated by the emergence of new capacities in eastern Europe. The Neo Group has already begun limited production at Klaipeda, Lithuania, where it has just completed stage one of its 308,000 tonne/year plant. Russian producer Polief also has longer-term plans to build a 120,000 tonne/year plant at Blagoveschensk and has just begun operations at its purified terephthalic acid (PTA) plant there.

One trader said that there was likely to be some attrition of PET producers over the coming years, adding that that some of the older producers may struggle to compete with the newer operations, which have better margins and were closer to a largely captive market base.

In the short term, pricing was set to be influenced by demand levels and weakening raw material prices. November paraxylene (PX) contracts settled at Euro865/tonne, down Euro40/tonne, and many expected December to settle below this level. Mono ethylene glycol (MEG) was also expected to settle lower, but no specific numbers have been disclosed.


By: Benjamin Purvis
+44 20 8652 3214



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