Europe PET market weakens on buyer reluctance and feedstock falls

04 April 2012 12:26  [Source: ICIS news]

PET is used in the manufacture of plastic bottlesLONDON (ICIS)--The polyethylene terephthalate (PET) market in Europe is weakening as buyers wait for prices to drop further amid falling feedstock prices, sources said on Wednesday.

People dont buy and producers dont reduce production, so they have to sell [PET] cheaper, a customer said.

Buyers are loath to delve into the market until sellers offers fall below the psychological barrier that is now €1,300/tonne ($1,711/tonne) FD (free delivered) Europe.

Producers want to sell…but there are no offers below €1,300/tonne, said a second customer.

Sellers, meanwhile, are concerned about margin loss. They talk of production costs possibly decreasing by €40/tonne from March to April, and one producer is already anticipating a €50–55/tonne drop in the price of PET.

The €1,300/tonne [price] would mean a loss of margin and margin retention is as good as it gets, the producer said.

March began with prices about €1,400/tonne but they dropped into the mid €1,300s/tonne and are now lower, according to data from ICIS.

The market is waiting for news from upstream paraxylene (PX) and monoethylene glycol (MEG). PX has already dropped by $65/tonne in the dominant Asian market to $1,585/tonne CFR (cost & freight) Asia. Europe April MEG contract discussions are proving difficult to begin because of rising production costs compared with falling Asian prices, but PET players are counting on a decrease or a rollover at the most.

As soon as there is clarity about feedstock developments and sentiment in Asia from Thursday, following the Chinese holiday this week, the market could become more active as sellers either decide it is the right time to drop prices further or buyers bank on a change of direction caused by a potential rush to buy product.

I am afraid what will happen if everyone buys at the same time, the second customer said.

($1 = €0.76)

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By: Caroline Murray
44208 652 3214



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