14 October 2011 23:59 [Source: ICIS news]
LONDON (ICIS)--European polyethylene terephthalate (PET) customers are reluctant to buy forward because they expect prices to fall towards the end of the year, sources said on Friday.
“It is too risky to buy [for November or December delivery] as prices could all be down. There is not much demand,” one PET customer said, having received offers to buy material from Asia that was yet to be shipped.
Some sellers agree that raw material values will fall, and with winter traditionally being the low season for bottlers, this could put downward pressure on prices.
Other industry sources agree that purchases are being made hand-to-mouth.
“The market doesn’t keep stock. There is no risk of a big increase, but there is a bigger risk for prices to drop,” a PTA buyer said.
One producer warned that tight paraxylene (PX) – the raw material for PET’s main feedstock, purified terephthalic acid (PTA) – would undoubtedly lead to an increase in raw materials in November. He added that in the current volatile environment, forecasts have been very difficult to get right.
Another customer said that for November prices to come off, the whole upstream chain needs to drop in value.
“If November prices are to fall, they have to follow everything else – crude [and PX],” the buyer said.
While the Asian market is quiet, demand remains relatively intact – so unless this situation worsens, it is unlikely that the markets will come crashing down, he added.
Should the financial crisis persist, however, government subsidies are bound to come into force, thereby aiding a possible rebound in PET prices in December and/or January, according to a PET and PTA producer.
“The economy will be so bad, a stimulus needs to come up. Medium-to-small companies in China are already talking about it,” the producer said. Either that, or Chinese buying power will come into force before the Chinese New Year on 20 January, or inventories will be lower.
“It is not a question of price – there is no demand,” a second producer added.
There were spot numbers heard as low as €1,310/tonne ($1,808/tonne) FD (free delivered) Europe, yet monthly agreements were made earlier in October around €1,400/tonne, according to data from ICIS. This is up from September’s range of €1,350–1,390/tonne.
($1 = €0.72)
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