Europe PET prices fall on poor demand and lower production costs

14 June 2012 17:38  [Source: ICIS news]

LONDON (ICIS)--The cost of making European polyethylene terephthalate (PET) is dropping and while demand is unseasonably poor, PET prices are decreasing too, sources said on Thursday.

"It is a bad situation everywhere," according to a producer.

There has been little evidence of the summer enticing more sales of PET. A combination of poor weather conditions and the economic crisis have resulted in hand-to-mouth activity.

"If demand is not present in the high season and raw material [prices] are dropping, PET pricing can only go one way," a customer said, echoing comments made by others.

When the PET bottling industry was expecting demand and therefore prices to pick up, at least for the traditional summer season, some customers willing to take the risk, dipped into the import basket. These volumes are arriving in June, but other than that, there have been no reports of any fresh import purchases this month.

"PET is confusing given that imports in June are not there, but the demand remains regular to soft as customers sit it out," a second producer said.

Spot June deliveries of European material are taking place at either side of €1,200/tonne ($1,519/tonne) FD (free delivered) Europe. This is a drop from highs of €1,415/tonne in March.

"With spot at €1,200/tonne and below this corresponds to import prices but without a timelag," a second customer said, adding that this highlights the difficulty European suppliers are in.

Raw materials have been on a downward spiral. Paraxylene (PX) and monoethylene glycol (MEG) have fallen by 14% since March.

Manufacturers have been losing margin since April so if raw materials drop in July, PET prices will have to remain unchanged and if raw materials rollover, PET prices should increase, according to a third producer.

"We need to sell while covering our variable costs or it's just not worth it," the first producer said.

"I am confident that in July, European prices will be the same if not below because the mood is so bad now," a third customer said.

($1 = €0.79)

Follow Caroline on Twitter for tweets on the PET market

By: Caroline Murray
44208 652 3214

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