Europe R-PET continues to hit record highs on supply shortages

10 May 2010 23:59  [Source: ICIS news]

LONDON (ICIS news)--European recycled polyethylene terephthalate (R-PET) prices are still mostly at record highs with values continuing to rise due to supply shortages, sources said on Monday.

“The situation is still not under control. It’s a wild market, prices are changing day-by-day,” one flake buyer said.

Regional pricing was becoming more apparent, according to players, with the highest figures seen in Italy and Germany, where supply constraints were most apparent.

“The [R-PET] market is highly regional. This has become more and more evident in the last few weeks,” a flake and pellet buyer said.

Colourless bottle prices increased by €40/tonne ($51/tonne) from two weeks ago at the low end of the range, to €400-500/tonne FD (free delivered) NWE (northwest Europe), according to global chemical intelligence service ICIS pricing.

The record high of €500/tonne was first reported on 26 April 2010. The previous high was €460/tonne, established from 16 June to 3 November 2008.

Mixed coloured bottle prices rose by €80/tonne from two weeks ago at the bottom end of the range, to €260-330/tonne FD NWE, according to ICIS pricing. The new record price of €330/tonne was first seen on 26 April 2010.

The previous high was €250/tonne, recorded from 4 June 2007 to 9 June 2008.

Colourless flake prices established a new high of €950/tonne FD NWE, rising €50/tonne at the top end of the range from two weeks ago, bringing prices to €840-950/tonne FD NWE, according to ICIS. Prices first hit record levels two weeks ago when colourless flakes were trading at €840-900/tonne.

The previous high was €885/tonne, reported from 16 June 2008 to 3 November 2008. Some sources said that colourless flake was now trading as high as €1,000/tonne due to low availability and strong demand, but this was not widely confirmed.

“We’ve heard €1,000/tonne for flake to the [downstream] strapping industry. This is out of the question for [downstream] fibre producers,” a flake buyer said.

Mixed coloured flakes continued to trade at a record high of €600-750/tonne FD NWE, buyers and sellers said. Some sources saw prices as low as €550/tonne, but this was not widely confirmed.

In line with the general market trend, the highest prices were reported in Germany and Italy. Mixed coloured flakes first hit record highs on 29 March 2010, when they were trading at €570-700/tonne, before climbing to their current level on 12 April 2010.

The previous high was €650/tonne, seen from 16 June 2008 until 3 November 2008.

Food grade pellet prices increased by €10/tonne at the top end of the range, to €1,060/tonne FD NWE, because of tight supply. Some sources said that food grade pellets could climb further in the coming weeks because of the high price of virgin polyethylene terephthalate (PET), which they must trade below in order to remain competitive.

One food grade pellet producer reported prices as high as €1,200-1,250/tonne FD NWE, but this was not widely confirmed. Prices at €1,200-1,250/tonne would be above the record high of €1,150/tonne, established from 12 September 2006 until 30 October 2006.

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

As weather conditions improved, market players had observed a strong pickup in Asian buying interest, which had kept supply short. According to sources, however, colder than expected temperature conditions were once again leading to low collection rates at post-consumer recycling facilities.

Some players continued to report R-PET bottles, which are the top of the R-PET supply chain, being sold into Asia from Europe due to higher prices in that region, aided by the weak euro against the US dollar which they said was further tightening the market.

Along with this, virgin PET bottle weight was reduced by 20% in 2009, according to market estimates, meaning that more bottles needed to be collected for each kilogramme of R-PET produced.

Further shortening the market, the global economic weakness and concerns over the environmental impact of plastic bottle usage caused a reduction of PET bottle consumption of around 20% in 2009 compared to 2008, sources said.

Buyers and sellers said that the R-PET flake market was suffering the biggest shortages. Some flake buyers said that they were now investigating switching to granulates instead of flakes, sourced from India, Egypt and the US, in order to ensure supply.

“We’re trying to source non-flake alternatives for production, so granulates and things, we’re checking India, Egypt and the US, but at the moment the margins are not making sense,” a flake buyer said.

It was unclear how long the market would remain tight, with some sources estimating that supply shortages would stay in place until at least the end of June.

“The imbalance of supply and demand brings a lot of stress,” a pellet manufacturer said.

($1 = €0.78)

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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