European chemical profile: PET

05 March 2012 00:00  [Source: ICB]


Polyethylene terephthalate (PET) can be made into a resin, fiber or film. The largest outlet is synthetic fibers, followed by bottle resin. PET film is used in electrical applications and packaging.


The European PET market is likely to lengthen in 2012, partly because of new production capacities coming on stream, but this could be tempered by a tight upstream paraxylene (PX) market.

The surplus supply of purified terephthalic acid (PTA), PET's primary feedstock, will continue unless there are line closures.

Following a period of consolidation of PET production sites, Europe has seen the reopening of existing units under new leadership. Most recently, in Spain, Cepsa Quimica bought Artenius' San Roque's PET site from La Seda de Barcelona in January 2011, and will increase capacity from 175,000 tonnes/year to 220,000 tonnes/year after expansions in 2012.

Other forthcoming new European capacities due in 2012 include Indorama Ventures' expansion of 190,000 tonnes/year to 390,000 tonnes/year in Rotterdam, the Netherlands, due to be completed in the second quarter.

The crux of supply and demand in Europe is no longer just a matter of seasonality in the PET main bottle market, which normally peaks during the warm summer months. Nowadays, developments in the Asian PET polyester segment dominate how the market reacts in Europe. During these difficult macroeconomic times there could be some forced rationalization as credit lines change and bank protection is reduced compared to recent years. In which case, it could still be a challenge to cover 3.5m tonnes/year of PET demand in Europe in 2012.


In 2010 prices slumped to below €1,100/tonne ($1,468/tonne) FD (free delivered) Europe and the first half of 2011 saw a dramatic recovery, which prompted highs of more than €1,600/tonne. These peaks proved to be unsustainable. Economic uncertainties hampered sales and prices dropped to around €1,200/tonne by the end of 2011, cutting into producers' margins. Customers identified an opportunity to buy forward, fixing prices well into the first half of 2012.

This year, some PET customers have opted to take more risks on the spot market than they did in 2011 as increased capacities and imports should create a more competitive PET market. Industry players believe 2012 will be characterized by high volatility upstream and uncertain demand.


PTA and monoethylene glycol (MEG) are reacted to make a basic ester, which is polymerized in a melt-phase polycondensation ­finishing reactor. The molten polymer is processed either into fibers/filaments, or sent to the solid state polycondensation unit to make bottle-grade chips.


Growth rates are predicted to be in the range 0-2% in 2012 with much dependent on macroeconomic sentiment.

Light-weighting in plastic bottles and the trend towards larger bottle formats are inevitably reducing consumption of virgin PET, as is the increased purification of tap water in various parts of Europe. PET in milk packaging has penetrated parts of Europe but much less so in other areas and is overall considered to be a slow burner. PET beer bottles have managed to break into some regions of Europe, notably in big name discount stores, but many countries have yet to adopt them.

Demand for recycled PET (R-PET) in Europe continues to rise as sustainability initiatives from the food and beverage sector drive growth. Polyester demand in China peaks in March, but weak export expectations of textile products amid the uncertain global economic outlook may delay the 2012 season. Asia is expecting 11.5m tonnes/year of PTA this year over its existing capacity of 43.7m tonnes/year but much of what happens in related markets in Europe and Asia will depend on the timeliness of these start-ups, as well as the availability of PX feedstock.

By: Elaine Burridge
+44 20 8652 3214

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