12 July 2010 23:59 [Source: ICIS news]
LONDON (ICIS news)--European recycled polyethylene terephthalate (R-PET) food-grade pellet prices extended their record highs by €50-100/tonne ($63-127/tonne) this week after supply constraints and high prices further upstream in the R-PET chain increased production costs, sources said on Monday.
Food-grade pellets were trading at €1,200-1,300/tonne FD (free delivered) NWE (northwest ?xml:namespace>
Strong demand from the food sector was being fuelled by corporate social responsibility initiatives, sources said.
“Food-grade buyers have taken into account that there will be times when virgin is higher than R-PET. Demand is mostly being led by sustainability goals. They won’t move away from R-PET,” a food-grade pellet producer said.
Nevertheless, players said end-users were beginning to voice concern over the large price differential between food-grade R-PET and virgin material, with some worrying that some could start lowering the percentage of food-grade R-PET they use in packaging despite their sustainability goals.
“[When] supplying a big player [in the end-use industries], it’s important to take into account… [that] they agree a yearly price… so when discussions begin next year, and it [food-grade prices] becomes more expensive, will they [buy] lower quantities? Certainly there [have] already been discussions around the price - the current levels took us all by surprise,” another producer said.
However, prices were unlikely to come down while the cost of R-PET flake material – which is the feedstock for food-grade pellet production – remained strong.
Colourless flake material was trading at €950-1,050/tonne FD NWE and, with around €200-250/tonne in production costs added on top of the price of flake material, food-grade pellets would need to be sold at a minimum of €1,150/tonne just to break-even, sources said.
The R-PET market has been in tight supply since the fourth quarter of 2009 because of low collection rates at post-consumer recycling facilities.
This has been attributed to several factors including: a colder-than-expected winter which lead to lower consumption of drinks bottles, the major source of post-consumer collection material; the economic downturn in 2009; environmental concerns leading to lower demand for water bottles; and virgin bottles in 2009 having a light PET content of around 25%, meaning more bottles needed to be collected per kilogramme of R-PET produced.
R-PET food-grade pellets equalled the previous record price of €1,150/tonne, seen between 12 September-30 October 2006, on 7 June 2010, before setting a new high on 21 June 2010, with prices further increasing in the following weeks.
ICIS records for R-PET began on 19 June 2006.
($1 = €0.79)
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