Europe R-PET prices extend record highs on supply and demand

28 March 2011 23:59  [Source: ICIS news]

LONDON (ICIS)--European recycled polyethylene terephthalate (R-PET) prices extended their record highs across all grades, with the exception of mixed coloured flakes, on tight supply and strong demand, buyers and sellers said on Monday.

“It’s [R-PET prices] just going up and up on the lack of [post-consumer] bottles,” a flake producer said.

R-PET prices have been at record highs since 31 January 2011.

The R-PET market was becoming extremely regionalised, with the highest prices seen in Italy and Germany, where availability was lowest.

Colourless post-consumer bottle prices rose by €100/tonne ($141/tonne) at the top end of the range this week, to €600–800/tonne FD (free delivered) NWE (northwest Europe), driven by higher prices in Italy and Germany on tight supply and strong demand.

The lowest bottle prices were representative of material originating in France, where many players were in wait-and-see mode because of uncertainty over the price evolution of upstream polyethylene terephthalate (PET).

Because virgin PET competes with R-PET on cost, virgin PET prices have traditionally been a major limiter on the high end of R-PET values. Commitments to sustainability at large corporations, however, are beginning to override price concerns. For example, Danone is aiming to use R-PET in 20–30% of bottles in 2011.

Mixed coloured bottle prices also rose by €100/tonne at the top end of the range, to €400–600/tonne FD NWE. Again the highest prices were seen in Germany and Italy, and the lowest in France.

“Everyone is waiting. We’ve not even got one [post-consumer] bottle price for April,” a French flake producer said.

Colourless flake prices rose by €60/tonne at the top end, to €1,200–1,360/tonne FD NWE. Although the majority of players in Germany and Italy said that rising demand and low availability meant that prices were no longer below €1,300/tonne, players in other countries continued to report values at €1,200/tonne.

“Colourless flake prices are above €1,300/tonne. I’ve never seen that before. It’s all down to tight supply and strong demand,” a flake buyer said.

Mixed coloured flake prices were stable at €1,000–1,200/tonne FD NWE, but could increase in April because of low availability.

“There’s a serious shortage… for sure it will go up in the next few weeks,” a flake producer said.

Food grade pellet prices rose by €25–50/tonne, to €1,600–1,650/tonne FD NWE, establishing parity with virgin PET spot values, with which they directly compete. Food grade pellet prices were expected to rise further if virgin PET values continue their upward trend.

“Virgin [PET] will grow further, and pellets with it,” a food grade pellet producer said.

Tight supply throughout the R-PET chain was the result of high buying interest and low collection rates at recycling facilities because of cold weather condtions throughout much of Europe.

Cold weather limits collection rates because bottled drinks are the major source of post-consumer R-PET material and fewer drinks are consumed in cold periods. Although temperatures across Europe were rising, there is a lag between improving weather conditions and availability reaching throughout the chain of around 4–6 weeks. Traditionally, collection rates remain limited until around May.

Coupled with this, the weight of virgin plastic bottles was reduced by roughly 25% in 2009, and further lightweighting is expected in 2011. For example, Evian announced in a January 2011 press release that its 1.5-litre bottles have been lightweighted by a further 11%. This means that an increased number of post-consumer plastic bottles need to be collected in order to produce the same tonnage of recycled material.

Demand was rising because improving weather conditions meant that bottlers were gearing up for peak-season demand, resulting in firmer offtake from the bottle-to-bottle market.

Consumption of R-PET had already been at a high level prior to the increased interest from bottlers. This was high because of several factors.

Rising prices and tight supply of virgin PET meant that players were switching to R-PET as a lower-cost alternative.

Cotton shortages caused by flooding in Pakistan and Taiwan, which damaged crops in the fourth quarter of 2010, meant that synthetic fibres such as R-PET were being used as an alternative.

Automotive demand was increasing as car manufacturers looked to secure greater volumes of mixed coloured flakes - used in car interiors - both on cost point and for their environmental image.

Demand was further buoyed by the sheeting industry, which was entering its traditional peak season - usually seen in the second and third quarters of the year, linked to trading patterns in the construction industry - adding to R-PET buying interest.

($1 = €0.71)

For more on R-PET visit ICIS chemical intelligence

By: Mark Victory
+44 208 652 3214

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