Europe R-PET still at record highs amid ongoing supply shortages

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

By Mark Victory

LONDON (ICIS news)--European recycled polyethylene terephthalate (R-PET) prices are still at record highs - excepting food grade pellets - with bottle grade values firming further due to supply shortages, sources said on Monday.

“I have never seen the market like this in over 20 years,” a major R-PET producer said.

Regionalised pricing remained in place, particularly in the mixed coloured flake market, with the highest prices being seen in Italy and Germany where supply constraints were most apparent, sources said.

Colourless bottle prices increased by €20/tonne ($25/tonne) from last week at the high end of the range, to €400-520/tonne FD (free delivered) NWE (northwest Europe), according to global chemical intelligence service ICIS pricing.

They first reached record highs on 26 April 2010 when material was traded at €500/tonne, before rising again this week. The previous high was €460/tonne, established from 16 June to 3 November 2008.

Mixed coloured bottle prices rose by €50/tonne at the top end of the range, to €260-380/tonne FD NWE. A new record price of €330/tonne was first seen on 26 April 2010 before increasing again this week.

The previous high was €250/tonne, recorded from 4 June 2007 to 9 June 2008. Some sources reported higher prices of €400/tonne for mixed coloured bottles, but this was not widely confirmed

Colourless flake prices were stable at €840-950/tonne FD NWE - again a record high.

Prices first hit record levels three weeks ago, when colourless flakes were trading at €840-900/tonne, before rising to their present level last week.

The previous high was €885/tonne, reported from 16 June 2008 to 3 November 2008. Some sources were expected prices to reach €980/tonne in the next few weeks due to a shortage of material,  while a few saw prices breaching €1,000/tonne in June or July.

“People are waiting for €1,000/tonne. We’re well in to the €900s/tonne at the moment. It’s all demand driven,” an R-PET producer said.

Mixed coloured flakes continued to trade at a record high of €600-750/tonne FD NWE. Some sources saw mixed coloured flake prices as high as €800/tonne, but this was not widely confirmed. The highest prices were reported in Germany and Italy, in line with general market trends.

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 €40/tonne at the top end of the range, to €1,000-1,100/tonne FD NWE, because of tight supply. Some sources were expecting food grade pellet prices to further increase in the coming weeks because of the high price of virgin polyethylene terephthalate (PET). Food grade pellet prices were approaching 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 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).

Below expected temperatures in much of Europe in April and May meant that post-consumer collection rates remained weak, further tightening the market.

“The weather is against us,” and R-PET bottle buyer said.

Coupled 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.

It was unclear how long the market would remain tight, with some sources estimating that supply shortages would remain in place until at least the end of June, and others suggesting that R-PET could remain in tight supply for the rest of the year, particularly if Asian buying interest strengthened on the weak euro against the US dollar.

“It hasn’t relaxed. It’s still very tight,” an R-PET flake buyer said.

The supply situation was now so tight that some flake producers were considering shutting down plants because they were unable to secure enough raw materials, although no firm decisions had yet been taken.

“[The producers] keep in mind to stop the machines [in the near future] because of low supply,” a flake buyer said.

 (€1 = $0.81)

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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