Europe August PET price increase will be cost-driven – traders

26 July 2012 14:12  [Source: ICIS news]

LONDON (ICIS)--The August price for polyethylene terephthalate (PET) in Europe is likely to be up on July because production costs are increasing, buyers and sellers said on Thursday.

"PET will cost €110–120/tonne [$134–146/tonne] more in August compared with July. I think August PET will be over €1,300/tonne," a producer speculated.

Buyers agree that the value of PET bottomed out in July, but are split on the opinion that August prices will go beyond the €1,200s/tonne FD (free delivered) Europe.

"€1,300/tonne is wishful thinking," a customer said. He added that import parity puts prices at €1,230–1,250/tonne, so proposing a domestic price far above this would be unrealistic.

Demand for PET has improved, but the reasons behind this – and the longevity of such improvement – remains questionable.

"Demand is improving, July is better than June. The [warm] weather is finally here and packaging people are buying more from us. It's the barbeque season," a second customer said.

While buyers and sellers report better sales figures for July, they pointed out that fundamentally there has been little variation, and that the uptick is unlikely to be the result of a fundamental change, and instead a reaction to low stocks and pre-buying before production costs increase.

"The underlying demand is still relatively low, this has just been a technical correction. The economy is still poor," the first customer said, echoing comments made by other buyers and sellers. 

The cost of raw materials is key when discussing August prices.

"[A higher August PET price] is purely going to be cost-driven," a third customer said.

The notion of higher prices stems from bullish upstream developments, where paraxylene (PX) – the raw material for primary feedstock purified terephthalic acid (PTA) – and ethylene, which feeds into monoethylene glycol (MEG), look set to rise.

Not all players believe that prices will rise steadily in August, however.

"I think it is better to wait [before buying] because the season is almost ending and nobody is buying to keep product on stock," a fourth customer said, envisaging a short-lived price increase.

July PET prices spanned the €1,100s/tonne.

($1 = €0.82)

By: Caroline Murray
44208 652 3214

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