High feedstocks impact PET pricing

19 March 2012 00:00  [Source: ICB]

Rising feedstock costs ­worldwide have been pushing up the prices of polyethylene terephthalate (PET), but this has not made the resin any less appealing, as companies' ­acquisitions of PET assets and capacity expansions continue to proliferate.

PRICING DYNAMICS

PET is produced from monoethylene glycol (MEG) and purified terephthalic acid (PTA). Paraxylene (PX) is a feedstock for PTA, and is very much ­influenced by the price of crude oil.

Mountain Dew bottles, Rex Features

 © Rex Features

PET is widely used in soft drink bottles and packaging

PET prices for February were at 84-89 cents/lb, an increase of 4-5 cents/lb from January.

Contract prices for February US PET are anticipated to increase by 3 cents/lb, following higher feedstock prices, sources said, to around 87-92 cents/lb for March.

On the back of persistently high feedstock costs as well as ­recovering demand, in late-­February, a major Middle East supplier raised its offers for March PET shipments by $80/tonne (€60/tonne) to $1,680/tonne free on board (FOB) Gulf Co-operation Council (GCC) or $1,720-1,730/tonne delivered (DEL) for regional buyers.

Traders said buying response to the offer was cool so far. An end-user said it still had enough supplies and could afford to hold off purchases. PET prices in the GCC region were last assessed at $1,620-1,660/tonne FOB GCC, ICIS data showed.

In Europe, most PET suppliers are intent on increasing March prices from February's €1,370-1,410/tonne FD West and East Europe, in an attempt to keep up with raw material costs and gain margin. There is talk of prices moving up by €25-40/tonne in March, but this will depend on what happens with upstream PX and MEG.

SLOWDOWN

In some areas of Europe, the PET market has started to flag as the rush to buy subsides.

"There is a lull," said a reseller. "People have material and they are not in a rush to buy." This ­follows a slew of pre-­buying and while all customers were not able to pick up product in advance of the traditional high season for bottling, the amount purchased from late 2011 to early February was more than usual.

"What was supposed to ­happen in March will happen in April," one customer said. The US PTA March contract price is likely to rise, based on ­expectations of an increase in ­upstream PX costs.

According to a PX producer, the March US PX contract was nominated up by 3-5 cents/lb ($66-110/tonne, €50-84/tonne).

However, the producer expects PX to increase by 3 cents/lb, following an increase in the PX Asian Contract Price (ACP) for March.

The PTA price is formula-linked to the monthly contract price for upstream US PX, which is heavily influenced by the ACP for PX.

Meanwhile, US PX spot market prices were notionally assessed higher at 73-76 cents/lb in early March, compared with 72-74 cents/lb from the third week in February, following spot price increases in Asia. The US February PTA contract was ­assessed by ICIS at 66.19 cents/lb. In Asia, PX prices continued to firm with the March PX ACP fully settled at $1,650/tonne CFR Asia, or $60/tonne higher than the February PX ACP of $1,590/tonne CFR Asia.

INDORAMA'S NEW PET

One of the world's largest plastics producers, Thailand-based Indorama Ventures, has major plans to increase its presence in PET, and intends to increase its global production capacity for PTA, PET and fibers from roughly 5.5m tonnes/year currently to at least 10m tonnes/year by 2014.

Indorama has several projects going on at once.

Already under ­implementation include PET and PTA expansions in Rotterdam, the Netherlands; a PET expansion in ­Wloclawek, Poland; a fibers expansion in Indonesia; and a PET expansion in China.

Also in the US, the company is planning a brownfield PET project, that would be co-located with a BP Chemicals PTA plant, either in ­Alabama or South Carolina.

Indorama intends to begin work on the US PET project in 2013, with start-up expected in 2015. The capacity would be about 432,000 tonnes/year.

The company's proposed ­integrated PX/PTA/PET project in the Middle East is expected to come on stream in 2017, and will be a joint venture with a refinery partner. A feasibility study is ­underway, but the location of the project has not been disclosed.

The company is also planning a joint venture PTA, PET and fibers project in India with India-based polyester fibers company Indorama Synthetics, which owns approximately 2% of ­Indorama Ventures. At the beginning of March, Indorama bought for an undisclosed sum the PET assets of Indonesian producer Polypet Karyapersada, which owns a 100,800 tonne/year PET facility in Cilegon, Indonesia.

PET pellets, Rex Features

 © Rex Features

These PET pellets will be used to make heavy-duty park benches

The facility is next to the former Polyprima PTA plant, in which Indorama has a 50% stake.

In February, the company, as part of its integration strategy in the US, acquired US-based ethylene oxide (EO)/ethylene glycol (EG) maker Old World Industries for $795m (€596m). Market ­observers comment that Indorama's purchase of Old World's EO and MEG plant could take away a source of feedstock for polyester producers.

"Indorama is big in PET, which takes MEG and PTA to make it," a PX producer said.

"[Indorama] bought one of their feedstocks [and] that would make it harder for the other PET producers to source the same molecule, as they aren't likely to sell it on the open market anymore," an industry source noted.

BP Chemicals and DAK ­Americas are the only PTA producers in the US, while domestic PET producers include DAK Americas, Indorama, Mossi & Ghisolfi and Nan Ya Plastics.

  • Additional reporting by Blanca Venegas in Houston, Anna Jagger and Caroline Murray in London and Yu Guo and Nurluqman Suratman in Singapore

By: Ivan Lerner
+1 713 525 2653



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