Cotton key driver for PET feedstock price hike trend in Europe

08 October 2010 01:00  [Source: ICIS news]

ARTIMINO, Italy (ICIS)--A lack of cotton is driving up the value of purified terephthalic acid (PTA), the feedstock for cotton substitute polyethylene terephthlate (PET), speakers at a PET industry forum said on Thursday. 

Industry players spoke at Global Service International’s (GSI) eighth annual “PET day” in Artimino, Italy.

“The polyester industry has to pay more [for PTA]. Cotton is too high and I wouldn’t be surprised if PET rates were cut for lack of [PET’s feedstock,] PTA,” commented GSI CEO Francesco Zanchi.

The recent flood in Pakistan has destroyed the cotton crop, not only for now but for the foreseeable future, Zanchi added, echoing views of other speakers and delegates. 

Worldwide polyester growth was estimated at 3m tonnes/year. Add to that a further half a million tonnes as substitution for the lack of cotton and that translates to 3m tonnes of PTA and 2m tonnes of paraxylene (PX), the main PTA feedstock, said Sanjay Sinha of Reliance.

Sinha described the prospective growth of polyester in China as “stupendous” over the next two years, “because of the lack of sufficient cotton to cater for demand growth”.

The deficit in China of PET’s secondary feedstock monoethylene glycol (MEG) would also not ease in the next few years, according to Sinha.

The whole polyester chain was going up in value, according to Andrew Noone, managing director of PCI PET Packaging and Resin and Recycling.

China will continue to take as much if not more than it does at the moment,” Noone said. 

Added to this was the threat of further PET plant rationalisation in Europe as big increases in nameplate capacities force utilisation rates to fall, said Noone.

Speakers at the meeting warned that higher feedstock costs would lead to more expensive PET.

“The price of PET will go up in dollar terms no doubt and in a substantial way...Today is the lowest price for the next six months at least,” Zanchi said, urging customers to buy product while they could.

Delegates were cautious in their response to talk of upward pricing.

 “PTA in Asia is crazy, but the price of PET should be volatile. It will be like every year,” a major PET buyer countered.

The euro-US dollar exchange rate could have a huge impact on pricing and with so much uncertainty it was important to manage one’s risk carefully by splitting purchases in different months, the buyer added. 

“A 0.1 change in the €:US dollar [ratio] equates to €75/tonne ($104/tonne) on PET,” the buyer said.

Another PET buyer speculated on PTA’s tightness being concentrated in Asia, thus impacting PET prices there as opposed to in Europe.

“PTA is not short in Europe really,” it added. 

Meanwhile European producers of PTA were seeking to increase their margins in October, citing tightness as justification for this move. 

PTA mostly tracked PX in 2010 and industry players expected September contracts to settle around in the low €700s/tonne FD (free delivered) NWE (northwest Europe) in September following PX’s surprise upward move of €65/tonne in the same month.

Two European buyers said they would follow a rumoured initial European October MEG contract settlement at €806/tonne, up €15/tonne from September.

The increase was attributed to rising spot prices throughout September, caused by tight supply and soaring Asian values.

PET suppliers were pushing for increases from September’s €1,080-1,120/tonne FD Europe because of earlier feedstock expectations and restricted availability.

However, the stronger euro against the dollar was weakening their argument, buyers said.

Guests at the forum represented more than 50% of global PET consumption, or roughly around 8m tonnes, according to Zanchi.

($1 = €0.72)

For more on PET visit ICIS chemical intelligence
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By: Caroline Murray
44208 652 3214

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