Europe R-PET prices hit record high on supply shortage

26 April 2010 23:59  [Source: ICIS news]

LONDON (ICIS news)--European recycled polyethylene terephthalate (R-PET) prices have reached their highest levels since ICIS records began nearly four years ago across all sectors except food grade, amid ongoing supply constraints, sources said on Monday.

Colourless bottles were trading at €360-500/tonne ($480-667/tonne) FD (free delivered) NWE (northwest Europe), an increase of €40/tonne from last week at the top end of the range, market sources said. The previous high was €460/tonne, recorded from 16 June to 3 November 2008, according to global chemical market intelligence service ICIS pricing.

Mixed coloured bottle prices hit €180-330/tonne FD NWE, an increase of €10-80/tonne from last week, sources said. The previous high was €250/tonne, seen from 4 June 2007 to 9 June 2008.

Colourless flake prices reached €840-900/tonne FD NWE, an increase of €15-50/tonne from last week, players said. Some sources saw prices as high as €950/tonne, but this was not widely confirmed. The previous high was €885/tonne, reported from 16 June 2008 to 3 November 2008.

Mixed coloured flake prices were stable at €600-750/tonne FD NWE, sources said. Mixed coloured flake prices hit earlier record highs on 29 March 2010, when they were trading at €570-700/tonne. The previous high was €650/tonne, seen from 16 June 2008 until 3 November 2008.

Food grade pellets also increased by €30-40/tonne from last week, to €1,000-1,050/tonne FD NWE.

“I’ve never seen prices this high in 20 years in the industry,” a major producer said.

The highest prices were seen in the Italian and German markets, where supply was tightest, sources said.

R-PET has been in tight supply since the fourth quarter of 2009. This was initially caused by low collection rates at recycling facilities due to severe winter conditions across Europe, which meant fewer consumers were buying bottled drinks - the major source of post-consumer polyethylene terephthalate (PET).

Additionally, the weight of virgin PET bottles was reduced by 20% in 2009, according to market estimates, which meant more bottles were needed to produce each kilogramme of R-PET.

Sources said that the global economic downturn and concerns over the environmental impact of plastic bottles had caused further reductions of PET bottle consumption by around 20% year on year in 2009.

Despite an estimated increase in collection rates of 6-7% in March from February, according to market sources, this was not enough to remedy supply problems as the increase coincided with higher Asian buying interest, as customers turned to European R-PET due to shortages of virgin PET in that region.

“It’s a crazy situation. It’s now even more difficult to secure volumes. We were expecting supply easing in May, but demand has exploded,” a flake buyer said.

According to European exporters, Asian buying interest was now decreasing, but domestic European demand was increasing due to a recovery in macro-economic conditions. Some sources in the flake market added that warmer weather in Europe had seen an increase in construction demand, which had boosted downstream strapping consumption.

“The big quantities are no longer going out of Europe due to the price increases,” a mixed coloured flake producer said.

Availability was particularly low in the flake market. As a result, Valplastic was planning to suspend production at its 30,000 tonne/year R-PET colourless hot-washed flake plant near Venice, Italy, from the first week of May due to insufficient feedstock supply, a company source said earlier on Monday.

The source added that it was not yet known when the plant would come back online.

Other flake producers also voiced concerns over the availability of feedstocks, adding that they could be forced to go offline in the next few weeks, were they unable to source requirements that were not yet covered.

“We are not sure if we are able to fulfil our production next week,” a flake producer said.

The R-PET market was expected to remain in tight supply throughout the second quarter, which is traditionally the peak season for demand. As a result, some players were forecasting further prise rises in May.

“It’s an interesting world. It’s [R-PET prices] going up rapidly. It’s a weekly game of prices,” the major producer said.

($1 = €0.75)

For more on R-PET visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect


By: Mark Victory
+44 208 652 3214



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