NPRA '11: US PET makers poised to succeed on March price hikes

27 March 2011 15:00  [Source: ICIS news]

US PET will rise for March contractsSAN ANTONIO, Texas (ICIS)--US producers of polyethylene terephthalate (PET) appeared to be winning the battle over their latest round of price increases heading into the annual International Petrochemical Conference (IPC) in San Antonio.

The likely successful initiatives come in spite of upstream paraxylene (PX) March contract price settlements that came in below producers' expectations.

PET producers had announced targeted price increases of 6-7 cents/lb ($132-154/tonne, €94-109/tonne) for March, on the assumption that the PX price would be concluded at an increase of 4-5 cents/lb.

The PX price is the basis of the formula that determines the purified terephthalic acid (PTA) monthly contract price. PTA is the principal feedstock for PET.

However, an initial PX March price was heard this week at 84.75 cents/lb DEL (delivered), representing a month-on-month hike of 2.75 cents/lb.

This was followed by another contract price agreement at 85.5 cents/lb DEL, which is up 3.5 cents/lb from the February price. A split settlement of this kind is unusual in the PX market.

Faced with the lower initial PX settlement, one PET producer was adamant that its proposed March price increase of 7 cents/lb was still justified, emphasising that US PET manufacturers have seen their margins severely eroded in recent months.

The producer added that the US market is characterised by tight supply and strong demand at present, while PX prices in Asia are subject to upward pressure in the wake of the Japanese earthquake disaster.

A second PET producer was heard to have issued an April price increase proposal of 5 cents/lb, even though discussions on March price settlements were still ongoing.

The producer had previously cited rising fuel costs and falling PET margins in defence of its March price hike initiative.

A different perspective was offered by one major buyer, who said that on the basis of the initial 2.75 cent/lb price increase on PX, the full March hike of 7 cents/lb on PET could not be justified.

The buyer acknowledged producers’ wish to improve their margins, but pointed out that an increase of 4-5 cents/lb on PET would still meet this objective.

Another buyer was more ambivalent, saying that recent market consolidation, production issues and the resulting tight supply mean that PET producers will probably be able to increase their margins.

“Importing material is out of the question based on current costs and prices in [North America] – they can push margin and still keep out the other competitive forces,” the buyer acknowledged.

US domestic prices are assessed by ICIS at 94.21-96.21 cents/lb DEL, having increased by 7.50 cents/lb in February.

US PET producers include DAK Americas, Indorama, M&G Group and NanYa.

Hosted by the National Petrochemical & Refiners Association (NPRA), the IPC runs through Tuesday.

($1 = €0.71)

For more on PET visit ICIS chemical intelligence

By: Samuel Weatherlake
+44 20 8652 3214

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