13 October 2010 05:11 [Source: ICIS news]
By Yu Guo
DUBAI (ICIS)--Asian polyethylene terephthalate (PET) bottle-grade chip prices climbed to four-month highs above $1,300/tonne (€936/tonne) and the uptrend is likely to continue amid surging feedstock costs, industry sources said on Wednesday.
PET bottle-grade chips are used in plastic bottles for mineral water and other beverages, and are also used as feedstock for polyester fibre production. Demand was just stable, particularly coming from the beverage sector, industry sources said.
Last Friday, spot prices of the material were assessed at $1,300-1,310/tonne FOB (free on board) Korea and/or China - the highest level hit since late-May 2010, based on ICIS data.
“The PET spot market now is mainly cost-pushed as the raw material costs surge became too fast for PET producers to keep up with,” said a major Korean PET producer.
“It looks like the current pricing mechanism no longer takes supply-demand fundamentals into consideration,” said another source from China Resources. “Demand becomes secondary now,” he added.
On Monday, the prices of raw material purified terephthalic acid (PTA) prices were at $1,010-1,030/tonne CFR (cost and freight) CMP (China Main Port), representing a month-on-month increase of about 14%, based on ICIS data.
Another feedstock - monoethylene glycol (MEG) had a 20% month-on-month jump in values to around $945-960/tonne CFR CMP, according to the same data.
“The immediate concern for PET producers will be whether they can pass on the surging feedstocks costs,” said a source at Indorama, a major southeast Asian producer.
A regional rader said: “Bottle chip producers remained very passive during this round of price hike, as the key reason for escalating PTA and MEG prices was the brisk demand from key downstream polyester fibre and yarn markets."
The bulk of PTA and MEG output in the region goes into textile production.
Prices of downstream products were also following the upward trend. In China, polyester filament yarn values increased (CNY) 300-600/tonne right after market players returned from their long holidays on 8 October.
On the other hand, demand for bottle chips remained relatively stable, with some buyers hesitating to procure material given the sudden jump in spot prices, traders and producers said.
“Spot demand from Europe was particularly strong during the past couple of weeks in anticipation of higher PET prices in Europe and [a] stronger euro against US dollar,” said a trader based in northeast Asia.
From the appreciation of the euro alone, industry players said they estimated an increment of at least $50/tonne in bid prices.
“Raw material prices will remain on an uptrend, judging by the current market fundamentals," said a source at a major Taiwanese PET producer, citing that producers could even resort to cutting back production just to protect their margins.
($1 = €0.72)
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