Europe PET bearish for June despite poor producer margins

24 May 2012 13:15  [Source: ICIS news]

LONDON (ICIS)--European polyethylene terephthalate (PET) customers are poised for further decreases while producers try to hold onto margins, sources said on Thursday.

"I don't see any reason why the price shouldn't drop because it is all very bearish," a customer said, echoing comments made by others.

The depressed mood in the market has deepened as crude oil softens and demand in China falters.

Some industry players thought in April that May prices would be relatively stable before increasing in June when the warmer weather would prompt some sort of a peak season for PET bottlers in Europe and the polyester sector in Asia.

"They have realised that in this environment PET cannot go up," according to the customer. 

Domestic material in May was sold just above and below €1,300/tonne ($1,625/tonne) FD (free delivered) Europe, according to ICIS.

"If suppliers want to sell they have to drop prices," a second buyer said. He added that June prices would probably fall to €1,230-1,240/tonne and that production costs would prevent them falling much further than around €1,220/tonne.

"All of the PET producers are working below break even point and it is time to recover margin," a producer said.

Customers report having received calls from suppliers keen to sell, but the lack of imports in June will mean that buyers are heavily reliant on domestic availability.

"If demand is added to the equation, there could suddenly be problems with [accessing] volumes," a second producer commented. He added that while demand remains uninteresting, sales have improved in May.

Amid news of upcoming capacities, there are planned PET shutdowns and a force majeure on PET at Lithuania’s Neo Group.

Raw materials look weak going into June, but the weakness of the euro against the US dollar may help stifle price drops in Europe.

"Some people try to increase [prices] but I think we will be able to keep the current [PET] price level," a third customer said.

The first producer commented: "In June nobody will pass the savings to the market… I guess that two days of good weather will move price levels up by €20/tonne."

A fourth customer summarised the situation: "Generally, oil price is still dropping, cotton price also…[and] demand in Asia is weak. On the other side the euro is very low, weather conditions are not yet in favour of huge consumption. Maybe the European football championship and the Olympic Games will increase consumption. We shall see."

Discussions regarding June prices are ongoing.

($1 = €0.80)

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By: Caroline Murray
44208 652 3214

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