Europe Oct PET price direction unclear on upstream, fx volatility

28 September 2012 23:59  [Source: ICIS news]

LONDON (ICIS)--The direction of European polyethylene terephthalate (PET) prices in October remains unclear because of volatility upstream and also in the euro/US dollar exchange rate, sources said on Friday.

"October is tricky with thoughts changing by the day -10 days ago I’d have said need a large increase but then [upstream] PX (paraxylene) dived in Asia and currency went on a detour," a producer said.

Some producers are aiming for a €50/tonne ($65/tonne) increase from September's €1,270-1,300/tonne FD (free delivered) Europe. Customers and some sellers see producers' targets to lift prices by this much as unrealistic.

"For October we still have no offer, probably €30/tonne increase, not more," a customer said.

Demand in downstream markets is not sufficient to support another increase, at least not a significant one, despite customers acknowledging PET producers' poor margins, sources said.

Partly because of this, other players, including a producer, expect prices to roll over at best.

"It is presently impossible to achieve any increase [in October]," according to a reseller, echoing comments made by other industry players. He added that on the back of the supply/demand balance, PET prices were likely to decrease by 10-15% in the fourth quarter.

There have already been reports from customers of cheaper imports making their way to Europe in the second half of October and November. One said it had been faced with a €100/tonne difference in offer price between prompt European PET, which was in the mid €1,300s/tonne FD Europe, and more competitively priced imported PET for delivery later in the month.

From China and South Korea, November delivery prices were quoted at €1,140-1,150/tonne CIF T1 European port on Thursday.

"It's a fight to get an order. [European producers] can't afford to be bullish," another reseller said.

If demand proves to be as poor as some people say it is, and if producers fail to pass the cost of production through to their customers, PET plant output could be curtailed.

"Several producers including ourselves will take action on rates if October turns out to be costly increase with minimum pass thru. We can't afford margin erosion," a second producer said.

So much depends on what happens with PX that there is little likelihood of clarity on PET until October kicks in.

"So October unfortunately will hang out at this time until the end of next week, we will see little negotiation or spot as the market awaits its cost structure," the second producer concluded.

($1 = €0.77)

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By: Caroline Murray
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