07 February 2011 23:59 [Source: ICIS news]
LONDON (ICIS)--European recycled polyethylene terephthalate (R-PET) colourless bottle and colourless flake prices established new record highs this week, as other grades were unchanged at record highs for a second week, sources said on Monday.
This was attributed to tight supply and strong demand.
R-PET colourless bottle prices rose by €50/tonne ($68/tonne) at the top end of the range, to €550-650/tonne FD (free delivered) NWE (northwest Europe), establishing a new record high, according to ICIS.
The previous record high was €600/tonne, first seen from 26 July to 23 August 2010, and equalled on 31 January 2011.
Colourless flake prices increased by €70/tonne at the top end of the range, to €950-1,170/tonne FD NWE, establishing a new record high, according to ICIS.
The previous record high of €1,100/tonne FD NWE was equalled on 17 January - prior to further increases this week - and first established between 28 June and 16 August 2010.
Colourless flake players were expecting prices to remain stable until the end of February because downstream markets could not absorb further price increases.
Colourless flake buyers said that margins had eroded by 5% to 10% since December 2010, because R-PET price hikes were too swift and too high to pass into downstream markets, which predominantly operate on monthly contracts.
One colourless flake producer saw prices as high as €1,275/tonne FD NWE, and said its minimum price was €1,175/tonne, but this was not widely confirmed.
The tight supply was the result of low collection rates at post-consumer recycling facilities. This was because colder weather limits the consumption of bottled drinks – the major source of material collected for use in R-PET.
Strong demand was the result of several factors.
High virgin polyethylene terephthalate (PET) prices - which some sources saw trading above €1,500/tonne FD Europe for spot material - meant that virgin PET consumers were introducing R-PET content as a cheaper cost alternative. Virgin PET prices were high because of difficulties in obtaining feedstock terephthalic acid (PTA).
Sustainability initiatives among large corporations were also 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 is targeting 25% R-PET content in its European bottles in 2011.
R-PET players said that these targets were overambitious and that just one large bottle manufacturer adopting such high percentages of R-PET content would completely drain the market in Europe.
Further stimulating demand, global cotton shortages - the result of flooding in Taiwan and Pakistan in the fourth quarter of 2010 - were causing downstream textile players to use synthetic alternatives such as R-PET as a replacement for cotton, sources said.
($1 = €0.74)
Additional reporting by Caroline Murray
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