Europe R-PET prices hit record highs on tight supply, strong demand

31 January 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European recycled polyethylene terephthalate (R-PET) prices have equalled or breached record highs across all grades, because of tight supply and strong demand, sources said on Monday.

With prices expected to further increase it was likely that all grades would establish new record highs in February.

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

Tight supply was the result of low collection rates at recycling facilities because of winter weather conditions, which had lowered the consumption of virgin polyethylene terephthalate (PET) bottles - which accounts for the bulk of post-consumer material collected for use in R-PET production.

High consumption was the result of several factors.

Sustainability initiatives among large corporations were increasing R-PET buying interest as companies looked to enhance their green credentials. Several bottled drinks manufacturers have set aggressive R-PET content targets for 2011 – for example Coca-Cola, which is targeting 25% R-PET content in its European bottles in 2011

Global cotton shortages, resulting from flooding in Taiwan and Pakistan in the fourth quarter of 2010, were fuelling textile demand for synthetic alternatives.

Further boosting demand, high virgin PET prices were causing substitution demand for R-PET, which was being used as a lower-cost substitute.

R-PET colourless bottle prices increased by €50/tonne ($68/tonne) at the bottom end of the range, to €550-600/tonne FD (free delivered) NWE (northwest Europe), equalling the previous record high at the top end of the range. Some players saw prices as firm as €620/tonne, but this was not yet representive of the bulk of trade.

Nevertheless, players were expecting prices to rise €20-30/tonne during February because of strengthening demand. February R-PET demand traditionally increases because January is a short-trading month due to public holidays in much of Europe in early January.

The last time R-PET colourless bottles reached €600/tonne was from 26 July to 23 August 2010. Colourless bottle prices once again hit €600/tonne on 17 January 2011.

R-PET mixed coloured bottle prices rose by €10-50/tonne, to €400-500/tonne FD NWE, due to tight supply and strong demand. This was equal to previous record highs last seen from 26 July to 23 August 2010. Mixed coloured bottle prices were also expected to increase by €20-30/tonne in February because of higher consumption.

Colourless flake prices were stable at €950-1,100/tonne FD NWE, as the market became increasingly regionalised. The highest prices were representative of material from Switzerland, Germany and Italy. Values at the top end of the range, first seen on 17 January 2011, were at record highs. The previous record high was between 28 June and 16 August 2010, when the top end of the range hit €1,050/tonne FD NWE.

Players were expecting prices to increase in February because of rising upstream R-PET bottle costs, but it remained too early to predict the extent of any rise.

Some players added that with the gap between colourless flake and virgin PET prices now at a minimum of €300/tonne, many traditional virgin PET players were turning to the flake market as a lower-cost substitute. During the second quarter of 2010, the spread between R-PET flake and virgin PET prices was as low as €50/tonne.

Mixed coloured flake prices rose by €20-50/tonne, to a new record high of €900-1,000/tonne FD NWE. The gap between colourless and mixed coloured material prices - traditionally around €200/tonne - was decreasing because traditional mixed coloured flake producers were preferring to produce food-grade pellet material because of stronger margins, limiting mixed coloured flake supply.

Mixed coloured flake prices first established new record highs on 24 January 2011, when values hit a top-end of €950/tonne FD NWE. The previous record high was €910/tonne FD NWE from 12 July to 23 August 2010.

Food-grade pellet prices increased by €50-150/tonne, to a new record high of €1,400-1,450/tonne FD NWE. This took food-grade pellet prices to parity with virgin material, which it traditionally competes with on cost point.

Nevertheless, corporate clients’ commitment to sustainability initiatives meant that players were now willing to pay prices in line with virgin PET. The previous record high for food-grade pellets was €1,300/tonne, seen between 12 July and 23 August 2010.

($1 = €0.74)

For more on R-PET visit ICIS chemical intelligence
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By: Mark Victory
+44 208 652 3214

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