Europe R-PET flake extends record high prices

12 July 2010 23:59  [Source: ICIS news]

LONDON (ICIS news)--European recycled polyethylene terephthalate (R-PET) flake prices have extended record high prices due to tight supply, higher feedstock costs and strong downstream demand, sources said on Monday.

Mixed coloured flake prices rose by €40-50/tonne ($51-63/tonne), to €750-910/tonne FD (free delivered) NWE (northwest Europe).

Some players felt that €910/tonne for mixed flake material was too high, especially considering that virgin polyethylene terephthalate (PET) prices were expected to fall, but this price was confirmed by both buyers and sellers.

“It’s an absolutely crazy situation at the moment,” one mixed coloured flake buyer said.

Price rises were attributed to seasonally-high end-user demand from the fibre and packaging industries. Material sold at €750/tonne was mainly traded into the automotive end-use market.

Some sources said that demand was also increasing due to the high price of colourless flake material, with end-users substituting a percentage of mixed coloured flake to bring down costs.

“People are trying to get cheaper costs, so they’re substituting colourless for mixed coloured flakes,” a flake producer said.

Mixed coloured flakes first hit record highs on 29 March 2010, when they were trading at €570-700/tonne, before climbing further in the months that followed.

Colourless flake prices increased by €50/tonne at the bottom end of the range, to €950-1,050/tonne FD NWE. Price increases were due to strong demand from the packaging sector and tight supply.

With virgin PET trading at a minimum of €1,100/tonne, and expected to further fall, colourless flake prices were now approaching parity with the cost of virgin.

Colourless flake prices at €1,050/tonne were for traceable material, which could be used in food applications, but which was below food-grade approved standard, sources said.

“Prices at €1,050/tonne, [they’re] not for food approved, but it is going into the food industry, which needs traceability. We have to use high quality bottles to get there, so it costs more,” a flake producer said.

Some flake producers said that colourless material needed to be sold at a minimum of €1,000/tonne just to break even, due to the high cost of colourless bottles – which are the feedstock for flake material.Colourless bottle R-PET was trading at up to €500/tonne FD NWE.

Some sources siad the European R-PET market was structurally short due to increased interest in social responsibility at major corporations fuelling a spike in demand, and R-PET availability would remain low until new capacity was brought on-line. There are no current expansion plans reported by R-PET players.

“I’ve got a gut feeling that the high pricing won’t fade quickly if food and packaging producers are obsessed with sustainable material. This will keep the prices up until new capacity comes in,” a flake buyer said.

Other sources argued that supply pressures would ease in the summer months because of the traditional summer holiday lull in demand. Nevertheless, this was disputed by some players, which said that the need to refill inventories would keep the market.

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 was attributed to several factors including: the colder than expected winter, which meant that people were drinking fewer plastic bottles, which are the major source of post-consumer collection material; the economic downturn in 2009 and environmental concerns lowering the consumption of water bottles; and a light-weighting of PET content of around 25% in virgin bottles during 2009, meaning that more bottles needed to be collected per kilogramme of R-PET produced.

ICIS records for R-PET began on 19 June 2006.

($1 = €0.79)

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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